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A HISTORY OF 

THE NATIONAL CORDAGE 

COMPANY 



WITH A SUPPLEMENT CONTAINING 
COPIES OF IMPORTANT DOCUMENTS 






BY 



ARTHUR S. DEWING, Ph.D. 




CAMBRIDGE 

HARVARD UNIVERSITY PRESS 

1913 



,C-i sOH 



COPYRIGHT, 1 91 3 
BY HARVARD UNIVERSITY 



FEB -6 1914 

©CI.A36188 5 



INTRODUCTORY NOTE 

This history of the National Cordage Company is part of a 
book on Corporate Promotions and Reorganizations now in 
preparation for the press. The extract has been separately 
printed for use in college classes. 

The Cordage Company was selected from among others for 
the following reasons: (i) at the period of its greatest strength, 
it was one of the most notable combinations effected up to that 
time, (2) its history affords illustrations of almost every aspect 
of financial policy that could pertain to an industrial combina- 
tion and the history of no other " trust " is so rich in illustrative 
material, (3) the failure of the company had a national signif- 
icance, as it tended more than any other, to create the feeling 
of uncertainty which led to the panic of 1893, (4) as the com- 
pany and its successors have disappeared entirely from the 
business world, the narrative can be made complete. 

The collection of selected documents in the supplement offers 
students an opportunity to familiarize themselves with sources 
available for a study of this kind. 



A HISTORY OF THE NATIONAL 
CORDAGE COMPANY 

CHAPTER I 

The Promotion and Failure 

The antiquity of the industry, 3; early pools, 5; the National Cordage Asso- 
ciation, 7; organization of the National Cordage Company, 8; expansion of the 
National Cordage Company, 1 1 ; increase of stock and public offering, 1 2 ; manip- 
ulation of hemp and buying competition, 16; financial operations, 23; failure, 28. 

Chronological Summary 

1 86 1. First trade agreement. 

1878. First pool. 

1887. Incorporation of the National Cordage Company. 

i88q. Beginning of policy of expansion. 

1890. Increase of capitalization and public offering of stock. 

1892. Maximum control of the Company. 

1893. Stock dividend of 100%. 
Failure. 

Our interest in the manufacture of cordage lies in the fact 
that here is to be found one of the first instances in which com- 
peting businesses united to form a large industrial consolidation 
for the sake of exacting monopoly profits. In its brief career 
the National Cordage Company illustrated almost every eco- 
nomic and financial problem that could ordinarily present itself 
in the history of any industrial consolidation. On the economic 
side it showed the gradual concentration under one control of 
upwards of ninety per cent of the American production in an 
industry where every condition favored competition. It domi- 
nated the market for the raw material and controlled as well 
the essential machinery used in the process of manufacture. 
To accomplish these ends every device was resorted to for creating 
a monopoly, — the " gentlemen's agreement," the pool, the 
legal trust, the leased corporation, and the holding corporation. 



4 TEE NATIONAL CORDAGE COMPANY 

The financial history was no less varied. The common stock 
was issued to the promoters and the preferred stock to the 
public; the stock was marketed by a professional operator; 
officers of the Company participated in speculative "pools"; 
a stock dividend was declared on the basis of fictitious earnings 
in order to aid the speculation in the Company's securities. 
Unable to carry the burden of an oversupply of raw material 
and finished product, with its trade position undermined by 
new competitors, the consolidation collapsed in a day. Re- 
ceivers were appointed and the Company was reorganized. 
All this occurred at the beginning of the panic of 1893, before 
the depression of the middle nineties, fully five years before 
the majority of our large industrial corporations sprung into 
being, and nearly ten years before the ill-fated among them had 
been reorganized. This early, one might say precocious, attempt 
on the part of the cordage manufacturers to create a monopoly 
gives the consolidation a particular interest for the student of 
economic history. 

At the time of its strength, moreover, the National Cordage 
Company was a giant. The Commercial and Financial Chronicle, 
usually sparing in adjectives, referred to it as the " great indus- 
trial corporation." l It occupied the center of the stage, with 
the American Tobacco, the General Electric, and the American 
Sugar Refining Companies of minor importance. Powerful 
New York Bankers were behind it. When, therefore, the whole 
house of cards fell to pieces in one crash, the collapse carried 
with it a disturbance and contraction of business confidence 
which contributed, more perhaps than any other single failure, 
to the acuteness of the crisis of 1893. After that time the reor- 
ganized Company led an uneven existence, reorganized and 
reorganized again, all the while diminishing in importance, 
until there remained hardly a vestige of its former prominence. 
Created originally to stifle competition, the consolidation was 
itself stifled by it. 

The spinning of rope was among the first industries set up 
in colonial days. A rope walk was to be found in Boston as 

1 56 Chron. 247, February 11, 1893. 



TEE NATIONAL CORDAGE COMPANY 5 

early as 1642; and John Harrison was granted a monopoly 
by the Massachusetts Bay Colony, for his " rope field," to 
extend down to 1663. " In the federal procession of 1788, the 
men employed in the industry outnumbered any other class 
of mechanics in Boston." From Massachusetts, the industry 
extended to other colonies. A picture of New York, in 1728, 
shows " Tucker's Rope Walk." l In all this early period, rope 
making was dependent on the business of shipbuilding; so that, 
with the gradual decline of the latter industry, it became rela- 
tively unimportant. After the invention of the self -binding 
harvester machinery, a sudden impetus was given to the industry 
through the demand for binders' twine. 

The first trade agreement among cordage manufacturers 
was consummated February 23, 1861. 2 The object was " to 
establish certain customs in the trade," correct abuses and 
misbranding, and to come to an understanding regarding prices. 
Weekly meetings were held in all the eastern cities where the 
cordage manufacture had secured a foothold. In July, 1874, 
the old agreements were entirely rewritten, and the " manu- 
facturers pledged themselves, as men of honor and integrity, 
to the true and faithful observance of the rules." This proved 
ineffectual to prevent underselling, and the agreement was 
strengthened in 1875. Since this, too, proved of little avail 
as competition became stronger the manufacturers concluded 
to adopt a pooling system. The first pool was established 
January 1, 1878. A committee in conference with the manu- 
facturers agreed that certain percentages of the total production 
of the country should be assigned to each manufacturer. " The 
percentages ranged from eleven and one-fourth per cent to 
one per cent." 3 When the business of a concern for a given 

1 Predecessor of the Tucker and Carter Company, one of the four chief constit- 
uents of the National Cordage Company. 

2 Much of the information in this paragraph was derived from The Cordage 
Industry by Benjamin C. Clark, Boston, 1895; a brief summary in eight pages, 
prepared for " The Memorial Centennial of 100 years of American Commerce." 

3 The Cordage Industry, by Benjamin C. Clark, p. 5. J. M. Waterbury testified 
before the Industrial Commission that L. Waterbury and Company had the largest 
percentage in the pool. XIII R. I. C. 127. As has become notorious in connection 
with the steel industry, price fixing and pooling agreements were frequently ar- 



6 THE NATIONAL CORDAGE COMPANY 

month exceeded the assigned percentage, that concern paid 
into the pool 2 cents a pound on the excess. The manufacturers 
whose production fell below their assigned percentages drew 
out from the pool 2 cents per pound on the difference. 1 " In 

1880, the amount of the pool was reduced from 2 cents to 1 cent 
per pound, and in June of that year to J cent; but in January, 

1 88 1, the pool was abolished." 2 Associations, conducted along 
the same lines, were formed in 1882 and in 1885. The last 
was to exist until February, 1888, but was broken up about a 
year previous, just before the organization of the National 
Cordage Company, on account of price cutting and false returns. 
Indeed, the reason for the failure of all these pools seems to 
have been that always some men would undersell their competi- 
tors, or make false returns to the organization. 3 There seems 
no doubt that competition was particularly severe during this 
period and the manufacturers regarded the agreements as means 
of mitigating its severity. Yet the ease with which they were 
broken up shows clearly that their influence was nominal. 
The pools controlled, however, a large percentage of the pro- 
duction, 4 and were probably able to reduce somewhat the amount 

ranged at " dinners." For example Edwin H. Fitler gave a " banquet " to the 
trade at the consummation of the arrangements for the pool of 1885. 

1 An excellent account of the operation of such a " pool " is given by Henry- 
Hudson in an account of " The Southern Railway and Steamship Association " 
which was operated among southeastern railroads, during this period. V Quarterly 
Journal of Economics, 70. Also reprinted in Railway Problems, edited by Wm. 
Z. Ripley, p. 98. See also. Hadley, IV Q. J. E. 158; Bradstreet, December 15, 1888; 
E. B. Andrews " The late Copper Syndicate," III Q. J. E. 508. 

2 Clark, The Cordage Industry, p. 5. 

3 This generalization is also borne out by the testimony given to the Industrial 
Commission by various men (XIII R. I. C. 11 2-1 7 2) and by the reports that early 
cordage men gave to the writer in conversation. J. M. Waterbury testified, " They 
were always broken up by other new competition starting, or by some men not 
being willing to act up to the agreement." (XIII R. I. C. 126.) 

4 The production of cordage during the life of the United States Cordage Manu- 
facturers' Association, the first pool, is seen from the following table. Statistics 
from Clark's The Cordage Industry. 

Pool 

1878 46,661,000 pounds 

1879 59,808,000 " 

1880 70,480,000 " 

These estimates averaged at least 70 % of the total American output. 



THE NATIONAL CORDAGE COMPANY J 

of cordage manufactured. They were hampered, and perhaps 
helped in a certain sense, by the enormous expansion in the 
cordage industry resulting from the manufacture of binder 
twine for the McCormick self -binding harvesting machinery. 

In order to obtain the advantages of combined action four 
of the largest manufacturers formed among themselves two 
separate organizations, one a " trust " and the other a corpora- 
tion. The first was an actual " trust " in the old legal sense 
of the word. 1 The owners of the stocks of the competing com- 
panies assigned them to a central board of " trustees," who 
issued certificates of proportionate interest or shares in the total 
property held by them as trustees. In this way the trustees 
had absolute control, as legal owners, of the subsidiary companies, 
yet these subsidiary organizations were kept intact as ostensibly 
competitive units. The legal trust was a logical development 
out of the " pool," when it was recognized that the managers 
of the pool had no legal control over the operations of its mem- 
bers. As trustees of the trust they were the legal owners of 
the property of the members, and could therefore administer 
each separate mill in the interest of the whole organization. 
In this case the trust was called the National Cordage Associa- 
tion. It controlled four separate companies. The L. Water- 
bury Company with a mill in Brooklyn, was distinctly the largest 
single manufacturer of rope and twine in the country. It had 
been in profitable operation for years as an independent mill, 
and it entered the new combination with a large surplus and 
high commercial credit. Its financial rating was well above a 
million dollars. The Tucker and Carter Cordage Company 
was one of the oldest concerns in the business. In the early 
part of the eighteenth century, the great-great-grandfather 

1 The references on the old legal " trust " are numerous, see especially W. W. 
Cook, Trusts, 1888; G. H. Wald, "Two Recent Trust Cases," I Ear. Law. Rev. 201; 
F. J. Stimson, " Trusts," I Ear. Law. Rev. 132; T. W. Dwight, " The Legality of 
Trusts," III P. S. Q. 592; N. Heinsheimer, " The Legal Status of Trusts," IV P. S. 
Q. 190. For good description of the operation of a trust see J. W. Jenks, " The 
Development of the Whiskey Trust," IV P. S. Q. 296 (reprinted in Trusts, Pools, 
and Corporations, edited by Wm. Z. Ripley, p. 22). For later legal opinions see 
Boisot, so Am. Law Reg. 751; Dodd, 7 Har. Law. Rev. 157. 



8 THE NATIONAL CORDAGE COMPANY 

of the then head of the Company was a shipping merchant, 
who started a rope walk in order to manufacture his own rope. 
In 1887, the mill was capitalized for only $500,000. Its business 
had permitted of thirty per cent in dividends, besides allowing 
upwards of $600,000 to be deflected into improvements. The 
W. Wall's Sons and the Elizabethport Cordage Company were 
old concerns quite as successful. It is true, therefore, that the 
cordage consolidation began its life with four well established, 
conservatively capitalized businesses, which had yielded high 
profits as separate organizations. These four companies operated 
2800 spindles and manufactured about thirty per cent of the 
rope and cordage produced in this country. 1 The Association 
had not the proportionate control over the industry that some 
of the early pools had had, owing to the fact that several of the 
largest manufacturers would not deed their mills to the trustees. 
All the Association's affairs were kept secret. After the Ameri- 
can Sugar Refining and Standard Oil decisions, 2 the attorneys 
for the manufacturers advised them to give up the trust form of 
organization because of its doubtful legality. The advantages 
of combination had already been secured in the corporate form 
of organization. 

The other means of combination was through a corporation 
in which the four manufacturing concerns had a joint interestl 
On July 20, 1887, the certificate of incorporation for the Nationa. 
Cordage Company was filed with the New Jersey Secretary of 
State. The Corporation was under the direct control of the four 
large cordage manufacturing companies referred to in the pre- 

1 The estimate given by J. M. Waterbury before The Industrial Commission was 
forty per cent to fifty per cent. (XIII R. I. C. 127.) It was excessive, however. 
In the latter part of 1891, a writer in the New York World, apparently conversant 
with the situation, estimated the spindle capacity of the country at 10,386. The 
checks available by the present writer at this time would indicate that this esti- 
mate is thoroughly reliable. The four mills just mentioned had 2800 spindles. 
Allowing for the growth of competition in the meantime, we may estimate roughly 
the control of the four mills just mentioned, at the time of the early " trust " and 
the formation of the National Cordage Company in 1887, at thirty per cent of the 
country's production. This was the nucleus of the whole consolidation. 

2 People v. North River Sugar Refining Co., 121 N. Y. 582, 1890. State v. 
Standard Oil Co., 49 Ohio St. 137, 1892. 



THE NATIONAL CORDAGE COMPANY 9 

vious paragraph. Its authorized capital was $2,500,000 and 
the initial cash subscription was stated as $1,000,000. This was 
soon increased to $1,500,000. The Corporation was at first 
merely a legal device for enabling the members of the National 
Cordage Association, the " trust," to cooperate with each other 
in the purchase of hemp and sisal and in the sale of the finished 
rope and twine. The capital, contributed by the manufacturers 
themselves, was used to finance the purchase of raw hemp and 
sisal for the members of the Association and to assist in carry- 
ing the considerable load of floating debt always present in a 
seasonal business like that of the manufacture of binder twine. 
The Company was conceived as a convenience to help in the 
conduct of the manufacturing business, a financial prop to help 
maintain the control of the market secured by the Association. 
The stock was all held by the manufacturers themselves and 
none was placed on the market during the first three years of 
the Company's history. The Directors were men thoroughly 
familiar with the cordage business. 1 In fact promoters, bankers, 
and stock market interests were conspicuously absent during 
the early years of the National Cordage Company's history. 

The practical common sense of the Directors of the Cordage 
Company is indicated by their method of conducting the business 
of the separate mills. Each one of the four manufacturing 
companies managed the operation at its own mills, while the 
organization of the National Company merely attended to the 
purchase of the raw material and the sale of the finished product. 
To stimulate economical production the Directors of the National 
required each operating company to bid a price at which it 
would manufacture for the central organization. In case 
the bid was not as low as that of the other subsidiary operating 
companies the unsuccessful competitor was required to close 
its mill at its own expense. This entailed considerable loss, 

1 James M. Waterbury, President, and Chauncey Marshall from the L. Water- 
bury & Company; Willard P. Whitlock and Elisha M. Fulton from the Elizabeth- 
port Company; Frank T. Wall from W. Wall's Sons; John A. Tucker and Caleb 
P. Marsh from Tucker and Carter. (Marsh had been hired by the Tuckers to look 
after their interests in the Cordage Association and the National Cordage Com- 
pany.) 



IO THE NATIONAL CORDAGE COMPANY 

although the Company would, of course, derive an income from 
its interests in the National Company and the National Associa- 
tion. The lower the price at which the manufacturers were 
willing to spin the cordage, the larger the margin of profit be- 
tween the raw hemp and the finished rope and twine, and inci- 
dentally the greater the earnings of the National Cordage 
Company. This method of preserving individual responsibility 
in the face of consolidation, of stimulating efficiency of personal 
attention to detail without relinquishing the economies of large 
scale production, is possibly unique, and certainly worthy of 
careful consideration. Later, when the listing committee of 
the New York Stock Exchange were passing judgment on the 
securities of the Company they are said to have called it " a 
novel idea " and " a pretty sound scheme of consolidation." 1 
" All the economies of consolidation are secured by this plan of 
organization, as well as the wholesome effect of free and keen 
competition among the manufacturers." 2 The fact that the 
Cordage Company discovered this device for solving some of 
the difficulties of concentrated ownership and control in the 
very earliest years of the combination movement is indeed 
worthy of note. 

Stimulated by the success with which they were managing 
the four large mills, the Directors of the National Cordage 
Company conceived the plan of a combination of cordage mills 
which should exert a monopolistic influence throughout the 
industry. To this end the Directors leased for ninety-nine years 
the properties of the four large cordage companies, and used 
the $1,500,000 of money paid into the Company's treasury as 
working capital. In this way the National Cordage Company 
began to assume some of the functions of the Association, and 
to play, therefore, a more important role. It was to be the 
nucleus of a larger combination. Furthermore, the Directors 
began to negotiate for the acquisition of various small mills 
throughout the east and by the end of 1890 they controlled by 
lease or option ten small mills besides the four already in the 

1 Quotation of J. M. Waterbury's testimony. XIII R. I. C. 127. 

2 Belmont and Vermilye's Prospectus for the sale of the preferred stock, p. 3. 



THE NATIONAL CORDAGE COMPANY II 

National Association. These mills altogether had a nominal 
capacity of upwards of 3900 spindles. 1 The total operating 
spindles of the United States amounted in 1890 to something 
between 9500 and 10,000. The first expansion of the National 
Cordage Company, therefore, gave it a nominal control over 
something like forty per cent of the rope and twine production 
of the country. 

In the spring of 1890 three circumstances prompted a further 
extension of this policy on the part of the National Cordage Com- 
pany. The first of these was the advice of the Company's 
attorneys that the old National Cordage Association, being 
of the nature of a trust, should not be continued. Much dis- 
cussion was current concerning the Standard Oil and especially 
the American Sugar Refining trust cases, then pending in the 
Ohio and New York courts. The attorneys assured the Cordage 
Association managers that the same ends could be attained 
under a corporate form of organization. This corporate form 
could be supplied should the National Cordage Company take 
over the entire functions of the Association. The second cir- 
cumstance that prompted an enlargement of the National 
Cordage Company was the desire of the Directors to secure a 
public market for the Company's securities, and thereby extend 
the business beyond the limits of their own capital which had 
been very much depleted by unfortunate speculations in raw 
hemp to be described presently. The public was not aware of 

1 Original four operating compaDies of the National Cordage Company: — 

L. Waterbury & Co Brooklyn, N. Y. 900 spindles 

William Wall's Sons Brooklyn, N. Y. 500 " 

Elizabethport Cordage Co Elizabethport, N. J. 800 " 

Tucker & Carter Cordage Co Brooklyn, N. Y. 600 " 

The ten mills acquired by lease or option during the latter part of 1889 and the 

early part of 1900: — 

Xenia Twine & Cordage Co Xenia, O. 100 spindles 

J. Rinek's Sons Easton, Pa. 100 " 

Akron Twine & Cordage Co Akron, O. 150 " 

Victoria Cordage Co Dayton, Ky. 400 " 

H. R. Lewis & Co Philadelphia, Pa. 100 " 

Randall, Goodale & Co Boston, Mass. 100 " 

Baumgardner, Woodward & Co Philadelphia, Pa. 50 " 

G. C. Pooley & Sons Buffalo, N. Y. 100 " 

New York Cordage Co New York City 36 " 

(soon dismantled) 
Altas Cordage Co New Orleans, La. 

(soon dismantled) 

List from Belmont and Vermilye Prospectus, and capacity from New York 
World, article quoted in 54 Chron. 34, January 2, 1892. 



12 THE NATIONAL CORDAGE COMPANY 

these circumstances and the Directors believed that the high 
financial standing of the four constituent cordage companies 
would enable them to sell the National Company's securities 
to the public. Whether or not the desire to recoup the treasury 
from the losses sustained by unsuccessful speculations was the 
primary motive that led to the extension from a private to a 
public corporation, it was at least incidental. In addition the 
Directors believed they could make a promoter's profit through 
the sale of the securities. The business community assumed 
in 1890, as it did in 1899, that immense profits could be made 
from the mere promotion of large industrial combinations. 
The third reason was the fever of extension then prevalent in 
the community and the belief that through a nominal control 
over the country's production of cordage the National Cordage 
Company could both exert a monopolistic influence on prices 
and also secure great profits from the economies of large scale 
production. No expectations of profits through combination 
and trade monopoly seemed too extravagant in 1890. The 
first " boom " period of consolidation was at its height and in 
sympathy with it the Directors sought to acquire the actual 
ownership of the mills previously held through leases. As the 
floating debt was unusually large during certain times of the year, 
on account of the seasonal character of the business, investments 
in fixed assets could not be carried by means of bankers' loans. 
Extensions in the direction of purchasing real estate could be 
financed, therefore, only through the increase of capital liabilities. 
All these changes were alone possible through an increase in the 
capitalization of the National Cordage Company and an extension 
of its credit beyond that of the local bankers and note-brokers. 

In the summer of 1890 the capital stock of the National 
Cordage Company was increased from $1,500,000 to $15,000,000, 
of which two-thirds was common stock and the other third 
eight per cent cumulative preferred stock. This latter was 
offered to the public 1 by August Belmont and Company and 

1 The public did not subscribe to the preferred stock to the extent that was 
expected. The Directors of the Cordage Company were compelled to take back 
a large part of the issue. 



THE NATIONAL CORDAGE COMPANY 1 3 

Vermilye and Company in an extravagantly optimistic pro- 
spectus dated October 9, 1890. 1 The common stock was divided 
about evenly among the original four companies and in addition 
some cash was paid to each, from the proceeds of the sale of 
the preferred stock. 2 With some of the money remaining from 
the sale of the preferred stock the National Cordage Company 
purchased outright the ten small mills which it already held 
under lease or option. 

The actual value of these fourteen mills, as operating plants, 
can be estimated by indirect evidence. In the banker's adver- 
tisements, it was said that " the value of the assets," of the 
National Cordage Company inventoried August, 1890, " exclu- 
sive of the proceeds of the $5,000,000 preferred stock to be 
issued, is $12,000,000 and upwards, over and above all liabili- 
ties." 3 We therefore assume that the valuation of the pro- 
moters and bankers whose judgment we have already quoted, 
placed an actual value of $17,000,000 on the fourteen mills, 
and all the quick assets then owned, or presently to be acquired, 
by the National Cordage Company. The capacity of these 
fourteen mills was 3936 spindles. 4 Excellent modern mills 
could have been erected at the time, for $500 per spindle. The 
working capital necessary to operate them would represent 
another $500 per spindle. Conservative figures would place 

1 Advertisement and announcement in 51 Chron. 491, October 11, 1890. 

2 For example, the Elizabethport Cordage Company received $2,397,300 in 
National Cordage Company common stock, and approximately $500,000 in cash. 
Balch v. National Cordage Company. Testimony of J. M. Waterbury before 
Commissioner C. N. Williams, October 17, 1892. 

3 Prospectus of Belmont and Vermilye, October 9, 1890, p. 3. Quoted also in 
52 Chron. 279, and in Listing Application to New York Stock Exchange. The in- 
ventory was made by President Waterbury, the Secretary and three members of 
the Board of Directors. Why a banking house of the standing either one of these 
possessed consented to lend its name to the marketing of a stock of such unknown 
value is indeed a mystery. Nor indeed were the bankers guarded in their direct 
assertions. They state the results of the plant apprisals as based on affidavits 
" satisfactory to them." The striking difference in tone between this early 
circular and the prospectuses now published by bankers is deserving of note. 

4 Figures taken from writer in New York World, quoted 54 Chron. 34; January 
2, 1892. From other evidence the present writer believes this estimate reliable. 
Supra, p. 11. 



14 THE NATIONAL CORDAGE COMPANY 

the reproduction cost at $1,000 per spindle, 1 including fixed and 
current assets. The actual value of the property of " going " 
mills of the most modern construction with a capacity of say 
4000 spindles, a half to two-thirds of which spun only binder 
twine, would not exceed $5,000,000. Mr. J. M. Waterbury, 
the first President of the National Cordage Company, admitted, 
in his testimony before The Industrial Commission, that the 
$5,000,000 of preferred stock " had some good will in there." 2 
Considering the antiquated character of some of the mills, 
and the considerable volume of current liabilities, it would be 
liberal to estimate the value of the property owned or soon to 
be acquired by the National Cordage Company, together with 
the proceeds of the sale of the preferred stock yet unexpended, 
as $4,ooo,ooo. 3 Against this property stood a capitalization of 
$15,000,000 upon which the Directors sought, — and succeeded 
for a while, — in paying eight per cent on $5,000,000 of pre- 
ferred stock and twelve per cent on $10,000,000 of common 
stock. This represented an annual charge of $1,200,000 on 
assets worth less than $4,000,000, — over thirty per cent. And 
such was the belief in the economies to be secured by consolida- 

1 These figures were checked by the writer according to three independent lines 
of reasoning: (1) opinions expressed by cordage men; (2) cost accounts of " rep- 
resentative mills "; (3) the financial rating of (a) representative mills, and (b) 
nine of the mills that entered the combination. 

Mr. Grimwood testified before the Industrial Commission in 1901, that the cost 
of erecting a 500 spindle mill was then $500,000 and that the working capital would 
be $250,000 more. XIII R. I. C. 113. This referred to a cordage mill, which is 
far more expensive than a twine mill, and a very large part of these mills then owned 
by the National Cordage Company were equipped only for binder twine. Besides, in 
1890 construction costs were less than in 1901, and the machinery was built 
according to less expensive patterns. 

2 XIII R. I. C. 129. 

3 This estimate of $4,000,000 for the actual assets of the Company is amply 
large. Of the fourteen mills, two were immediately dismantled. All of the smaller 
mills had been acquired at inflated values. The net quick assets, which are con- 
siderable with any manufacturing mill, were largely offset by bank loans. The 
current assets had been much depleted by unfortunate speculations in hemp. From 
various indirect lines of evidence, the writer feels that $3,200,000 would represent 
a truer valuation of the mill property and cash assets. He prefers, however, to 
use the larger figure, to avoid any possible undervaluation of the Company's 



THE NATIONAL CORDAGE COMPANY 1 5 

tion, that the market price of the common stock reached $140 a 
share in less than two years. 

The purposes of the enlarged activity of the National Cordage 
Company, aside from the change from the trust to the corpora- 
tion, were to force the stock of the Company into the hands of 
the public on the one hand and on the other hand to extend 
the business so that the Company might acquire a nominal 
control over the industry. The Directors sought to obtain 
the first object by means of a " stock pool." The preferred 
stock had already been put on the market by bankers. The 
common stock was divided about equally among the four 
original cordage concerns. It was then reassigned in February, 
1 89 1, to L. Waterbury and Company, the largest of the cordage 
companies, under what amounted to a trust agreement l for the 
marketing of the stock directly through the New York Stock 
Exchange. 2 The administration of this pool was placed in 
the hands of James R. Keene, 3 and several New York bankers 
became directly interested in the success of the pool. While 
Keene was making a market for the common stock on the Ex- 
change the National Cordage Company's directors for whom, 
indirectly, he was acting, agreed not to sell any of their personal 
holdings not assigned to L. Waterbury and Company under 
the pooling agreement. As a result of Keene's activities and the 
subsequent financial statements of the Company, the market 
price of the common stock was forced up from $73 a share in 
March, 1891, about the time the pool began its life, to $142 a 

1 For example, certificate for 23,878 shares of the National Cordage Company's 
common stock, issued to the Elizabethport Cordage Company, February 24, 1891, 
was reassigned to L. Waterbury and Company on the same day, under the agree- 
ment. Balch v. National Cordage Company. Testimony before Commissioner 
C. N. Williams, October 17, 1892. 

2 Mr. F. K. Sturgis, of the present banking firm of Strong, Sturgis and Company, 
served as the intermediary who attended to the details of the arrangement. Later, 
at the solicitation of the banking interests, he became President of the reorganized 
company. 

3 It will be remembered that Keene was employed by the Morgan syndicate 
to market the United States Steel Corporation stock, some ten years later. He 
was also concerned with a speculative attempt to corner the United States Leather 
Company's common stock. 



1 6 THE NATIONAL CORDAGE COMPANY 

share in December, 1892. Early in 1893 the pool was liquidated 
and the profits divided. During this time the stocks of the 
Company were distributed among upwards of a thousand 
investors. 

The other object which the Directors of the National Cordage 
Company hoped to attain through an enlargement of their 
Company was the actual control over the industry. To accom- 
plish this end they became aggressive in three directions. They 
sought to control the market on raw hemp, they sought to 
control the manufacture of cordage-making machinery, and 
finally they sought to buy up all the competing cordage mills. 

The market price of hemp is subject to pronounced and rapid 
fluctuations. At the time the Company was formed, in 1887, 
the price of manila hemp was about 7 J cents per pound. It 
rose rapidly, reaching a maximum of 9 cents in the autumn of 
the same year. From this maximum it fell to 6| cents the follow- 
ing summer, and then rose rapidly again until, in the early 
spring of 1889, it reached 13 cents per pound, — the highest 
price until the time of the Spanish war. During 1889 and 1890 
it fluctuated wildly, frequently varying 3 or 4 cents in the course 
of a single month. In January, 1891, the price of hemp stood 
at nine cents from which figure it sank slowly, but steadily, until 
the time of the failure of the National Company. This brief 
summary shows the unsteady character of the hemp market, 
an unsteadiness which invited manipulation on the part of the 
officers of the National Cordage Company. 1 When the cordage 

1 The following significant paragraph appeared in the New York Times, Sep- 
tember 3, 1887: — 

" Mr. Marsh, the Treasurer of the company, yesterday said that it did not pose 
as a monopolist, but it had secured the whip hand of its competitors, and it pro- 
posed to retain it as long as possible. ' Something had to be done/ said he, ' the 
quantity of machinery in existence was far in excess of the demand and there was 
not use for all of it. Somebody had to quit, and we determined not to be the ones 
if we could help it — and I think we have succeeded. Neither do we propose to 
pay any one for stopping. We have combined simply to reduce the cost of pro- 
duction to a minimum, and if any of our competitors are able to produce cheaper 
than we can now we will take a back seat and let them pick out the music. We do 
not propose to make excessive prices, but expect to make our profit in decreasing 
the cost of production. One thing we are satisfied of — we have all the raw 



THE NATIONAL CORDAGE COMPANY IJ 

consolidation was formed, it acquired control of practically all the 
" spot " and " nearby " hemp. 1 The competitors had great diffi- 
culty in securing their raw material, 2 and the smaller ones were 
forced into selling their plants to the "trust." The National 
Company had practically a corner in hemp during the summer 
of 1887, and during the autumn and winter of 1888, but when 
it temporarily withdrew its artificial support in the spring of 
1888, the Company lost heavily on the whole transaction. Mr. 
Marsh, the Treasurer, had anticipated that the heavy purchases 
of the Company would maintain the price. He failed to see 
that this would require the Company to absorb the entire 
supply of hemp and sisal at a level of prices which would so 
increase the cost of cordage as to curtail the demand and there- 
fore defeat the very end the Company had in view. The first 
unsuccessful experience was not sufficient, and when the prices 
of raw hemp and sisal fell to low levels in the autumn of 1888, 
the Company tried again to artificially fix the price. Again 
it was unsuccessful and suffered severe losses. While engaged 
in this manipulation the Company sought to strengthen its 
position in the raw hemp market by means of agreements with 
jobbers. The Directors of the Company induced the five firms 
in Manila, that completely dominated the raw hemp market, 
to agree not to sell to any American manufacturer except the 
National Cordage Company. The contract also stipulated 
that these five concerns " would not sell any house in England 
manila hemp, unless that house in turn agreed that they would 
not sell to anyone in this country except at an advance of over 
half a cent a pound above the price we (National Cordage Corn- 
material, and I can't really see how other people are going to manufacture Cordage 
without Sisal or Manila.' When asked how prices had been affected by the com- 
bination he replied that some prices would be a little higher in sympathy with the 
rise in the prices of the raw material, but those prices were abnormally high just 
now, and he added with a twinkle of satisfaction in his eyes, ' There is no immediate 
prospect of a tumble in the price of either.' " 

1 In the case of certain small manufacturers who happened to have considerable 
supplies of raw hemp and rope, the National took them off their hands at inflated 
prices. 

2 William W. Fitler testified before the Industrial Commission of the difficulty 
in securing hemp during these years. XIII R. I. C. 147. 



1 8 THE NATIONAL CORDAGE COMPANY 

pany) were paying." 1 The agreement fell to pieces 2 in about 
six months; but during the time it lasted, the National Company 
was at a great advantage over its competitors. Even without 
any such contract it will be observed that the Company, con- 
trolling as it did a large part of the demand for raw hemp, could 
effectually raise or depress the price by coming forward or with- 
drawing from the market. It chose all along to raise the price. 
Finally during 1 891, in a constantly falling market, the National 
Cordage Company purchased very large quantities of hemp 
for future delivery. These purchases were carried on in the 
name of " the National Syndicate," and its accounts were re- 
corded in " a small black book without a name," 3 elsewhere 
alluded to as " the private ledger." These speculative transac- 
tions were undertaken at the instigation of certain of the Direc- 
tors, and the losses sustained by the National Cordage Company, 
through the operations of the National Syndicate were paid 
back to the Company by the Directors. 4 There is additional 
evidence to show that the Company embarked on other spec- 
ulations in hemp in the early part of 1892 and in the autumn 
endeavored, unsuccessfully, to obtain a corner in the raw sisal 
market. 5 In all these transactions it suffered severe losses, 
and there is no evidence to show that the Directors who were 
responsible for the losses reimbursed the treasury of the Com- 

1 J. M. Waterbury, XIII R. I. C. 131. 

2 English jobbers were advised that the contract could not be enforced in com- 
mon law. 

3 Affidavit of Ernest B. Balch, on motion for further examination of books of 
National Cordage Company. Heard before Chancellor McGill, July 24, 1893. 
The following very pertinent passage occurs in the Report of the Reorganization 
Committee, — " The Committee find, on examination of the accounts, that prior 
to October, 1891, sundry operations in merchandise, of a more or less speculative 
character, and not likely to occur again, were made, which resulted in loss to the 
Company." Reorganization Committee Report, June 15, 1893. 

4 Contract between National Cordage Company and the National Syndicate, 
dated October 31, 1891. The return of the losses is directly referred to in an entry 
in the National Cordage Company's principal ledger. " Loss assumed by the 
National Syndicate, in accordance with terms of contract, dated October 31, 1891, 
and a resolution of the Board of the same date." This transaction is also alluded 
to by the Reorganization Committee in their report of June 15, 1893. 

6 Letter from Dr. A. M. Cole, Akron, Ohio, May 5, 1893. 



THE NATIONAL CORDAGE COMPANY 19 

pany. Briefly then, beginning soon after the incorporation 
of the Company in 1887 down to its failure in 1893, the Com- 
pany had sustained only losses in its speculations in raw 
material. 

To establish a virtual monopoly in the manufacture of cordage 
the National Company entered into contracts and agreements 
with various cordage machinery makers in the United States 
and in England. The contracts amounted to an agreement on 
the part of the National Company to pay the machinery men 
large sums each year, in return for which they agreed not to 
sell cordage machinery to the competitors of the Company. The 
most considerable contract of this kind was executed with one 
John Good, expecially known in the industry as the inventor 
of the "fast and slow gill chain " machinery for laying hemp. 
Good had been a machinist in the employ of the Tucker and 
Carter Company at the time he was working on the invention. 
Subsequently he started to manufacture his patented machinery, 
and in addition built a rope mill where it was used. This mill 
was the largest competitor of the National Cordage Company 
in New York City. 1 An agreement was entered into between 
the National and the Good Companies whereby the former 
agreed to pay the latter a sum of $200,000 each year, in con- 
sideration of which the Good Company agreed not to operate 
its cordage mill, not to sell any of its patented machinery to any 
of the National Company's competitors and finally to stop all 
infringements on its patented machinery. 2 A similar exclusive 
agreement was made with other manufacturers of cordage ma- 
chinery, notably W. C. Boone, Jr., who, with his father and 
grandfather, had manufactured rope laying machinery for over 
fifty years. 

The most extensive and far reaching undertaking which the 
officers of the National Cordage Company took upon themselves 
was the acquisition or control of competitive rope and twine 

1 Balch v. National Cordage Company. Testimony of J. M. Waterbury. 

2 Good also gave the Cordage Company an option on his entire machinery 
and cordage business. The option called for the payment of "several millions." 
Current rumors stated the amount as $7,000,000. Contract between Good and 
National Cordage Company dated November 2, 1891. 



20 THE NATIONAL CORDAGE COMPANY 

mills. 1 In pursuit of this end the Company adopted three 
different courses. After paying for the ten mills acquired before 
the autumn of 1890 with the proceeds of the preferred stock 
issue, the Company had not enough money in its treasury to 
purchase numerous other mills outright. At first the Directors 
followed the plan of buying the equity in mills, giving to the 
sellers a mortgage for a large part of the purchase price. 2 The 
second method of acquisition was by means of a finance company. 
During 1891, the National Cordage Company acquired many 
mills of varying capacities. Eight 3 of these were taken over by 
the Security Corporation at high valuations. 4 This Company 
acquired the cash to pay for these mills through the issue of 
$6,000,000 of bonds, and then leased them to the National 
Cordage Company in consideration of an annual rental of 
$360,000, and an annual sinking fund payment of $225,000. 
The National Cordage Company guaranteed the payment of 
the interest and the principle of these bonds. The rental took 

1 President Waterbury used to call these expenditures " buying competition." 
One mill, in Pennsylvania, was prepared for the purpose, with wooden painted 
shafting and nicely painted, but useless machinery. It might have cost $5,000 to 
prepare the hoax; the officers of the National Cordage Company paid $180,000 for it. 
(Authority of conversation with an old member of the National Cordage Company). 

2 Testimony of J. M. Waterbury, XIII R. I. C. 130. Also stated by Secretary 
Marsh, 53 Chron. 325. Clearly shown, also, in the revelations at time of failure, 
in 1893. 

s Boston, Standard, New Bedford, Laurence, Middletown, Chicago, Ohio, and 
American (Field). Reorganization Circular No. 2, November 20, 1893. First 
public announcement of this finance corporation, 53 Chron. 713. 

4 There seems little doubt but that these " Security mills " were little more than 
" cats tails," as Forbes expressed the Burlington branches built for the purpose of 
being bought up. The Standard and Boston mills had been established by a 
prominent Boston manufacturer. Some time before they were acquired by the 
Security Corporation, they were united under one corporation with a capitaliza- 
tion of $1,500,000. The Directors of the National paid (judging from estimates 
of men connected with the two companies at the time) two or three times what the 
mills were worth at a liberal valuation. Part of the purchase money was in the 
common stock of the National Cordage Company. Whether this common stock 
was acquired through the Keene " pool " or from the cordage interests who origi- 
nally received it, does not seem clear from the evidence at hand. Altogether the 
equity of these security corporation mills was estimated by the Receivers of the 
Company, less than two years later, at $163,447, the mere value of machinery, as 
second hand equipment. The cost of these properties had been over four million 
dollars. (Summary of Receivers' valuation in 57 Chron. 764.) 



THE NATIONAL CORDAGE COMPANY 21 

care of the interest, and the sinking fund would retire them 
at maturity. In this way the National secured the nominal 
ownership and actual control of the mills, without issuing its 
own securities. 1 Yet, relieved of its form, the existence of the 
Security Corporation involved nothing more than a device 
whereby the National Cordage Company could issue bonds 
without disobeying its contract with its own preferred stock- 
holders which provided that the Company should incur no bonded 
liability. 2 It is indeed surprising that the preferred stockholders 
and the bankers who offered the preferred stock to the public 
did not attempt to prevent this method of financing. Some 
of the preferred stockholders actually did object to the plan 
on the ground that it impaired the strength of their security. 3 
The third method of acquiring control of the mills was through 
price agreements and stock ownership. The former device 
was pursued with the John Good Company's cordage mill in 
New York, as previously stated, and with Fitler and Company 
in Philadelphia. 4 In the cases of corporations not amenable 

1 Further particulars of this financing were something as follows: The Security 
Corporation was organized under -New Jersey laws, for the express purpose of tak- 
ing title to the additional smaller mills. It leased these mills to the National Cor- 
dage Company for a term of twenty years, from November i, 1891. The stock 
was held in the treasury of the National Company, and by its officials. For the 
payment of the mills, the Security Company issued $6,000,000 six per cent First 
Consolidated Mortgage Gold bonds, due November 1, 191 1, secured by mortgage 
to the Manhattan Trust Company covering the mills and the benefits of the lease. 
These bonds were guaranteed principle and interest by the National Cordage Com- 
pany. Of the six million dollars of bonds, $1,790,000 were reserved to retire prior 
liens, and the remainder $4,210,000 were listed on the New York Stock Exchange. 
(See 54 Chron. 643.) An attempt was made through one B. L. Smyth and Com- 
pany to advertise and sell these bonds to the public. Few of them, however, got 
out into the hands of the public. Nearly all were carried by the cordage men, on 
a twenty-five per cent margin, with New York bankers. 

2 " The creation of any bonded debt, except with the consent of holders of record 
of at least eighty per cent of the preferred stock is prohibited by by-law." Listing 
Application, New York Stock Exchange; Summary in 52 Chron. 279, February 
14, 1891. 

3 " As I understand the matter, the Security Company's bonds have added to 
the liabilities of the National something like $6,000,000 in addition to its fifteen 
millions of stock." Balch v. National Cordage Company. Testimony of E. B. 
Balch, September 26, 1892. 

4 A trade agreement was probably consummated with Fitler and Company, of 
Philadelphia, who operated a 600 spindle mill, of modern construction. Such an 



22 THE NATIONAL CORDAGE COMPANY 

to such trade agreements, the men in control of the National 
Cordage Company sought to acquire a controlling stock interest. 
Large blocks of stock of the Plymouth Cordage Company 
were acquired in this way. 1 By these various means 2 the Na- 
tional Company increased its control of the cordage production 
from forty per cent of the country's output in October, 1890, 
to eighty per cent by December, 1891. Through agreements 
with rival manufacturers, its actual control amounted, in January, 
1892, to ninety per cent of the output 3 of all the rope and cordage 
mills of the country. 4 

agreement is asserted in 54 Chron. 34, January 2, 1892, and in Mr. J. G. Taylor's 
testimony, although denied by William W. Fitler. XIII R. I. C. 147, 163. The 
two companies worked in harmony with each other from the first. All evidence, 
other than that noted above, indicates that at least a gentlemen's agreement existed 
between the two companies. 

1 The Cordage Directors, in their own interest and in the interest of the Com- 
pany, had secured almost a majority. This was carried for them by a Boston 
banker on a twenty-five per cent margin. A large part of the Plymouth stock 
had been acquired through the estates owning the New Bedford Cordage Company 
when the latter was bought. It was deemed very important to secure the control 
of the Plymouth, as Waterbury understood from Drexel, Morgan & Company that 
they would back the consolidation in that event. 

2 Those concerns it could not control The National Cordage Company sought 
to ruin. One example illustrates their method. There was at that time a successful 
cordage jobbing and manufacturing concern by the name of Travers Brothers 
Company. It also conducted a hammock manufactory on Fifty-Second St., 
New York City. When the officers of the National found it impossible to buy the 
Travers business, they established a hammock factory one block away and sought 
to induce the Travers employees to take work in the new establishment. They also 
started the manufacture of cotton twine specialties in direct competition with 
similar products made by the Travers Brothers. 

3 These estimates are based on the assumption that the mills of the country had 
altogether a capacity of 10,000 spindles. 

National Cordage Company 

Spindles 

Acquired in 1887 2,800 

Acquired before Oct. 1890 1,136 

Acquired between Oct. 1890 and Dec. 1892 4,050 

Number directly controlled 7,986 

Controlled through agreements (approx.) 1,000 

Approximate control 8,986 

This information was obtained from the Commercial and Financial Chronicle, 
quoting the New York World, 54 Chron. 34, January 2, 1892. Other evidence 
obtainable by the present writer indicates the essential correctness of these esti- 
mates. 

4 In September, 1801, the Secretary of the National Cordage Company made 



THE NATIONAL CORDAGE COMPANY 2$ 

At first, the financial condition of the National Cordage 
Company seemed to foretell unusual success. In the statement 
for the business of the first year of the consolidated Company, 
ending October 31, 1891, the report showed a book surplus of 
over $3,000,000, and a profit on operations for the year amount- 
ing to $1,406,313.45. Out of this, eight per cent was paid 
on the $5,000,000 of preferred stock, and nine per cent on the 
$10,000,000 of common stock. In the meantime the stock 
pool under the able management of Keene had secured a wide 
market for the stock of the Company. It became the leading 
industrial security dealt in on the New York Stock Exchange. 

Some time during the autumn of 1892, a prominent member 
of the New York Stock Exchange said to President Waterbury, 1 
" Your stock is selling too high," meaning that, for speculative 
purposes, it would be better to have the stock selling at $70 a 
share rather than $140, even though the capitalization had to be 
doubled. This was especially important as the Keene pool 
was about to be liquidated and a new pool formed. It was 
essential for the success of the second pool that the prices of the 
stock should be well maintained. Accordingly President Water- 
bury presented the idea to the Board of Directors, who decided 
to issue, in January, 1893, a one hundred per cent stock dividend. 
The book value of the subsidiary plants was marked up to cor- 
respond with the inflation of the capital assets. The common 
stock was increased from $10,000,000 to $20,000,000. At 
the time, the Directors stated that the new issue was to be given 
stockholders " to represent about $11,000,000 of assets acquired 
by the Company since its formation, and which it is the policy 
of the Company to hold intact." Simultaneously the Com- 
pany stated it would be its policy " at the end of the first fiscal 
quarter after the distribution of the new stock," to declare 
dividends equivalent to ten per cent on the preferred and seven 
per cent on the new common stocks. Following this state- 

the following statement, " The National Cordage Company is thus nearing the 
goal that it originally set out to reach, namely the acquisition of all the mills in the 
country." 53 Chron. 325, September 5, 1891. 

1 As the man is now prominent, the name is withheld, at the request of Mr. 
J. M. Waterbury. 



24 THE NATIONAL CORDAGE COMPANY 

ment came the publication of the second annual income ac- 
count for the year ending October 31, 1892, showing a net profit 
of $2,710,749, out of which $1,367,063 was carried to surplus 
after the payment of the full dividends on both classes of 
stock. 1 

The maximum influence of the National Cordage Company 
was probably attained in the spring of 1892. At that time its 
position was dominant, in the market both for raw hemp and 
manufactured cordage. Nothing had occurred to undermine 
this position. But in the summer and autumn of 1892 the props 
began to slip. The Good patents for the " fast and slow gill 
chains," upon the basis of which Good had entered into his 
monopolistic agreement with the National Cordage Company, 
were decided not original by the courts, another manufacturer 
having brought to light an English patent of previous date. 
Accordingly in May, 1892, the National Company broke off 2 
its contract with Good and the latter established a new corpora- 
tion, backed by men closely allied with the First National Bank 
in Brooklyn. On October 31, 1892, W. C. Boone, Jr., the other 
prominent manufacturer of rope laying machinery, severed his 
exclusive contract with the National Cordage Company. Other 
manufacturers of machinery with whom the Company had an 
understanding or agreement followed suit. 

The weakest point of the combination was its inability to 
control new competition. As rapidly as the officials of the 
Company would " buy up " the competing mills, the old owners 
either in their own name or as representatives of others, would 
start to build new mills. This process is admirably illustrated 
by the experience of the National Cordage Company in the 
Ohio field. The details are worth recording as indicating 
the inherent difficulty of acquiring a monopoly of production 
in an industry where economic conditions favor free competition. 
In the middle of 1891 the National Cordage Company acquired 
the Miamisburg Binder Twine and Cordage Company of Miamis- 

1 56 Chron. 247. 

2 Good tried to make out that the cancellation of the agreement was due to 
him. (Interview, New York World, April 27, 1892.) 



THE NATIONAL CORDAGE COMPANY 25 

burg, Ohio, at the fictitious valuation of $185,000. l The Miamis- 
burg Company had been selling binder twine to an agricultural 
implement firm by the name of Hoover and Gamble. In Novem- 
ber, 1 89 1, Hoover and Gamble organized the Miamisburg 
Cordage Company to manufacture binder twine, and engaged 
the mill superintendent of the old Miamisburg Binder Twine 
and Cordage Company. Early in 1892 the National Cordage 
Company, through a subsidiary, acquired the second Miamis- 
burg Company from the Hoover and Gamble interests for 
$130,000. This was equally exorbitant. In May, 1892, some 
of the old stockholders of the two companies organized the 
Miamisburg Twine and Cordage Company, and with the pro- 
ceeds secured from the sales of their stocks to the National 
Cordage Company built a new mill with which they began to 
compete with the National Cordage Company in the binder 
twine branch of the industry. At the same time the Hoover 
and Gamble interests added the manufacture of rope and cordage 
machinery to their harvesting implement business, prompted 
by the difficulty independent twine manufacturers were having 
in obtaining equipment. To attend to this part of their business 
they employed the two executive officers of another cordage 
mill previously acquired by the National. At the same time 
the Hoover and Gamble interests formed the Northwestern 
Cordage Company, which built a larger binder twine mill in 
St. Paul. This experience in Miamisburg was by no means 
exceptional. The purchase of the Sewall and Day mill in 
Boston for $800,000 merely stimulated the formation of the 
Ludlow Cordage Company, by several of its large stockholders. 
The purchase of the Suffolk Cordage Company merely prompted 
its President to build a mill in Newburyport, ostensibly for 
his son. Agreements not to engage in the cordage business 
were broken by the simplest subterfuges, so that instead of 
acquiring control of competitors the National Cordage Company 
found that its policy actually resulted in stimulating competi- 
tion. By the middle of November, 1892 at least ten new cordage 

1 Property estimated by one local correspondent, May 10, 1893, at $25,000. 
Letter of Chas. E. Kinder, VI Cordage Trade Journal, 260. 



26 TEE NATIONAL CORDAGE COMPANY 

mills in as many different localities, had been finished or were 
being built. 1 

In the winter of 1892 and spring of 1893, in the face of increas- 
ing competition, the National Cordage Company manufactured 
very large quantities of binder twine and something more than 
the normal production of rope. 2 In April, 1893, the Company 
was stocked with over fifty million pounds of binder twine 
and rope, representing an actual cost of between $5,000,000 and 
$6,000,000. Against this heavy item of quick assets, the Com- 
pany had borrowed upwards of $5,000,000 from New York 
and New England banks. These loans were in the form of 
demand loans and short term commercial paper. At this 
juncture came the Reading receivership, and the acute stage 
in the free silver controversy. Some of the bankers notified 
the National Cordage Company that the merchandise loans 
would not be renewed to the same extent and the note-brokers 
recommended a contraction in the Company's borrowings. 

During the last of April, 1893, business and financial conditions 
were far from satisfactory. Conditions abroad were unsteady 
and the failure of the National Bank of Australasia and the 
doubt concerning the outcome of our own currency legislation 
caused an uneasy feeling in the London market. Our rates 
of foreign exchange were very high and gold was steadily ex- 
ported. Prompted by the rapid depletion in the Treasury's 
stock of gold, rumors were circulated in the newspapers that 
Secretary Carlisle contemplated the redemption of treasury 
notes in silver. These rumors produced such a bad effect 
that President Cleveland on the evening of April 23, authorized 
the emphatic denial of their truth. Yet the plight into which 
the Treasury had fallen through the steady exportation of gold 
and the equally steady purchase of silver called for immediate 

1 Auburn, N. Y.; Beverly, N. J.; Miamisburg, O.; Ludlow and Newburyport, 
Mass.; St. Paul, Minn.; and four new mills in Canada. 

2 The production of the subsidiary mills of the National Cordage Company, 
both rope and binder twine: — 

Year ending October 31, 1890 43,411,725 pounds 

1891 74,704,835 " 

1892 130,315.156 

Six months, ending April 30, 1893 80,757,197 " 



THE NATIONAL CORDAGE COMPANY 2J 

and drastic action. Secretary Carlisle proposed that the New- 
York banks should lend the Treasury $50,000,000 in gold. The 
expectation of some such action caused a severe contraction 
in mercantile credits during the last days of the month. Call 
money fluctuated violently between three and forty per cent. 

At the close of the Stock Market on Friday, April 28, the 
National Cordage Company's stocks were strong with the 
preferred stock at $103.75 an d the common stock at $61 a share. 1 
In the presence of their rapidly maturing mercantile loans 
and commercial paper, and the unsettled condition of the money 
market, the Directors at a meeting held on Saturday, April 29, 
decided to issue $2,500,000 preferred stock, to the stockholders, 
at par. They gave as an excuse the seasonal character of the 
business, and the fact that the Company considered it unwise 
to depend on " temporary accommodation in the money mar- 
ket." 2 This move, which might have been conservative and 
wise if made months before, came at a time when the financial 
pulse was sensitive to the slightest irregularity. The fact that 
the Company had issued a stock dividend in January, and that 
its statements had indicated large earning power and a liberal 
surplus, served only to accentuate the doubt and uncertainty. 
Yet the Directors believed that they had gained the confidence 
of the public and that they could easily secure subscription 
to the preferred stock, the market price of which was above 
par. In this assumption they were mistaken, nor had they made 
adequate provisions to protect their stocks in case the news 
of the new issue should, as they might have expected, lead to 
short sales. When the old Keene pool was liquidated in the 
winter, a new pool had been formed in which certain of the Direc- 
tors had the most substantial interests. This second pool had 

1 The new stock, after the declaration of the one hundred per cent stock divi- 
dend, referred to earlier. Supra, p. 23. 

2 Official statement in the Sunday papers of April 30, 1893. Mr. Waterbury 
stated that the preferred stock subscription was adopted on the advice of banking 
interests, consisting of J. H. Wright, of Drexel, Morgan & Co., Brayton Ives, of 
the Western National Bank and Geo. G. Williams of the Chemical National Bank. 
" These men thought that the issue could be made in safety. They advocated it 
warmly." Interview with J. M. Waterbury, New York Herald, May 5, 1893. 



28 THE NATIONAL CORDAGE COMPANY 

nothing like the financial strength of the Keene pool. So that 
when on Monday, May i, the " bears " fell upon the securities 
of the National Cordage Company there were no strong banking 
interests to protect them. 1 The Directors did what they could, 2 
but without much avail. The common stock fell to under $50 
a share and the preferred to less than par. It was clear that, 
unless the preferred stock could be better supported, the new 
stock subscription would prove a failure. Accordingly the 
Directors issued another statement, published in the morning 
papers of Tuesday, May 2d, intended to reassure the stockholders. 
It was pointed out, on false grounds as it appeared later, that 
the Company had upwards of $4,000,000 in cash working capital 
and that the surplus of the current year, together with the pro- 
ceeds of the new preferred stock issue, would bring the amount 
to $7,ooo,ooo. 3 During the day the pressure on the Cordage 
Company's stocks was distinctly less, but on Wednesday it was 
again renewed. The common stock fell precipitously from $50 
to $36 and the preferred from $98 to $83. Clearly the new 
stock issue was a failure; nobody would subscribe at par for a 
stock possessing a market value of only $83. And in addition 
the rapid decline in the Company's securities had already done 
untold harm to its credit. 

On Thursday, May 4, the seriousness of the Company's 
condition was thoroughly recognized. The officers were power- 
less to withstand the pressure which confronted them on all 
sides. The collapse had come suddenly and they were unpre- 
pared to meet it. 4 Before the end of the week upwards of 

1 The raid was probably helped by Keene himself. There were very substan- 
tial rumors to the effect that the operator had taken the short side of the market 
since the dissolution of the first pool. At all events he had ceased to cooperate 
with President Waterbury in supporting the Cordage Company's securities, owing 
possibly to the belief that one of the Directors had been false to his contract and 
had sold some of his own stock outside of the pool. 

2 J. M. Waterbury told the present writer that he supported the common stock 
down to fifty dollars a share. 

3 The New York Journal of Finance, May 2, 1893. 

4 The President and the Treasurer alone of the officers kept in close touch with 
the financial side of the Company's affairs; they were the only ones of the Directors 
who knew of the precarious condition into which the finances of the National Cord- 



THE NATIONAL CORDAGE COMPANY 29 

$561,000 in notes would mature 1 and subsequent examination 
of the accounts showed that the Company was carrying less 
than $100,000 in cash balances at the banks. Liquidation was 
renewed in the Company's stocks and neither the Directors 
nor the managers of their pool offered any support. The com- 
mon stock opened at $37 and declined in a few minutes to $28. 
It finally reached $18.75. The preferred stock opened at $78 
and declined to $65. 2 Three stock exchange firms collapsed 
during the day, all attributing their troubles to the inability 
of Mr. Waterbury to respond to calls for more margin on the 
National Cordage Company's stocks carried on account of the 
pool or for him individually. 3 One of these firms had been acting 
directly for the pool, and after its failure 2,200 shares of the 
National Cordage Company's stock was sold " under the rule." 

age Company had fallen. The acute stages were of sudden development. For 
example, a Director went south on Saturday, April 29, believing everything sound. 
Telephoned for on Monday, during Wednesday and Thursday he raised $1,100,000 
on his own notes in the hope of tiding over the crisis. In fact all the Directors had 
indorsed the Company's paper, which shows their faith in its ultimate success. 

1 Bill of Complaint for appointment of Receivers for National Cordage Com- 
pany, presented to Chancellor McGill, May 4, 1893. 

2 The extreme fluctuations of the cordage stocks during the week may be seen 
from the following table (fractions omitted). Quotations of common are for the 
new stock, after the issue of the one hundred per cent dividend. 

April 29 May i May 2 May 3 May 4 May 5 

Common 59-57 57~49 52~49 49~35 37~i8 22-15 

Preferred 102-101 101-99 100-89 98-83 78-65 57~45 

Sales in shares 

Common 8,460 39.95° i3>9QO 23,690 101,200 32,250 

Preferred 25 1,800 1,000 2,800 4,600 2,000 

3 Henry Allen and Company, — the firm who took care of the " pool's" account 
said: " In the bad breaks in market values yesterday the margins of some important 
customers were exhausted, but as these customers were not only reputed to be 
solvent, but very rich men, the firm took care of their accounts, out of its own re- 
sources, on pledges from these customers that about $200,000 in cash would be paid 
back before a quarter past ten o'clock this morning. These promises were not 
kept." A member of the firm later said " among the customers who had failed 
to keep their promises was James M. Waterbury, President of the National Cor- 
dage Company." (New York World, May 5, 1893.) 

Schuyler Walden, the second firm that failed, said (New York Sun), " ' I had n't 
the faintest idea that trouble was at hand. Mr. Waterbury had been very kind 
to me. This has come like a thunderclap. The banks began calling for additional 
margin on Cordage, and I naturally looked to Mr. Waterbury. I learned this morn- 
ing, that he would n't respond, and I had to go under.' " 



30 THE NATIONAL CORDAGE COMPANY 

These events on the Stock Exchange made the condition of the 
Company even more precarious and late in the afternoon the 
Directors of the Company voted to authorize President Water- 
bury to prepare a Bill of Complaint praying for the appointment 
of Receivers. At half past ten in the evening Mr. Waterbury 
appeared at the house of Chancellor McGill at Jersey City 
and confessed default to a demand note of $50,000 presented 
by the National Park Bank. Receivers were appointed late 
in the night. 1 " Cordage has collapsed like a bursted meteor." 2 

1 Edward F. C. Young, President of the First National Bank of Jersey City, 
and G. Weaver Loper, appointed Receivers. The latter was Treasurer of the Na- 
tional Cordage Company. 

2 Editorial in Commercial and Financial Chronicle, May 6, 1893, 56 Chron. 728. 



CHAPTER II 

The Reorganizations of the Cordage Consolidations 

Effect of the failure of the National Cordage Co., 31; first reorganization plan, 
^$; modified plan, 36; organization of United States Cordage Company, 38; failure 
of United States Cordage Company, 43 ; plans of reorganization, 43 ; the Standard 
Rope and Twine Company, 45; the reorganization of the Standard Rope and 
Twine Company, — The Standard Cordage Company, 51; fundamental cause of 
disaster of the Cordage Consolidation, 53. 

Chronological Summary 

1893. Reorganization of the National Cordage Company. 

1894. United States Cordage Company begins business. 

1895. Failure of United States Cordage Company. 

1896. Business assumed by Standard Rope and Twine Company. 

1905. Failure and reorganization of Standard Rope and Twine Company. 
191 2. Liquidation of Standard Cordage Company. 

The failure of the " cordage trust " dealt a severe blow to 
business confidence. Coming as the failure did, directly after 
the Reading receivership, when the banking community was 
greatly disturbed over the heavy floating debt of the Northern 
Pacific Railroad, and worst of all, when the whole country was 
in the throes of the free silver controversy, the cordage " scandal " 
was thrown into clear relief as a glaring example of unsound 
" trust " finance. Charles R. Flint testified that it " discredited 
almost every industrial then existing." x The Company had 
declared a hundred per cent stock dividend late in January, 
and gone into the hands of receivers early in May. No financial 
methods quite like these had been known before, except perhaps 
the payment of the dividend on the preferred income bonds 
of the Philadelphia and Reading Railroad, on the eve of the 
receivership. But in the case of the Cordage Company the 

1 XIII R. I. C. 91. 
31 



32 THE NATIONAL CORDAGE COMPANY 

financial world was dealing with a totally unknown quantity, 
for the promotion of industrial combinations had but just begun. 
Every industrial security was tainted by the cordage collapse. 
Nothing seemed sound, nothing secure. General Electric 
stock fell from $84 to $58 a share during the day following 
the failure; l even conservative railway issues, such as that 
of the Central of New Jersey, fluctuated from three to five 
points. 

The failure of the Cordage Company was all the more note- 
worthy, because it was the first disaster to befall a large industrial 
consolidation. During the later eighties and the early nineties 
occurred the first small wave of industrial promotions. Although 
small when compared with the fever of promotion a decade 
later, it had attracted wide attention throughout the country. 
The Sherman Act of 1890 was the climax of this movement, 
and the Cordage failure the dramatic end. The press throughout 
the country cited the National Cordage Company as an example 
of wild promotions, and the iniquitous ways of Wall Street. 
Even financial circles were stunned. They had had con- 
fidence in the Directors of the National Cordage Company, 
because the men were manufacturers thoroughly familiar with 
their business. They were, perhaps, the ablest men in the 
industry. Sound economic principles lay at the basis of the 
administration of the plants and in the first years of its 
history, the four mills that went into the original trust were 
successful. When, however, two executives of the Company 
became more interested in the market quotation of their stocks 
than in the wise administration of their cordage mills, the enter- 
prise was changed from a business to a speculation. Extension 
of control became a mania with the officers, and their ambition 
stifled their sound business judgment. They dreamed of an 
absolute monopoly of which they should be masters, and in 
the fever of conquest they lost the shrewdness of judgment 
which had enabled them to acquire their first success. As the 

1 So serious, indeed, did the condition appear that President C. A. Coffin 
of the General Electric Company issued an elaborate statement. (56 Chron. 
792.) 



TEE NATIONAL CORDAGE COMPANY 33 

panic of 1893 approached, they were unprepared to meet it. The 
well organized business of two years before had changed, through 
the craze for extension, into an unwieldy and loose composite. 
The withdrawal of the bankers' credit was merely the occasion, 
not the cause, of the collapse. 

Recognizing the necessity of a quick reorganization of the 
National Cordage Company's finances a Reorganization Com- 
mittee l was arranged by the banking interests. A report was 
published under the date of June 15, 1893. 2 In this report the 
members of the Reorganization Committee showed a lack of 
appreciation of the magnitude of the failure. " Their examina- 
tion into the affairs of the Company led them to believe that the 
chief impediment to the financial success of this Company 
has been that of lack of adequate working capital." 3 In other 
words the Committee in their first opinion attributed the failure 
of the Cordage Company to the exigencies of tightened credit. 
And in this presumption they were borne out by the report 
of the Accountants who found current assets equal to $10,500,000 
and the real estate account approximately $15,000,000 more, 
making the total assets well over $25,ooo,ooo. 4 The debt 
was close to $12,000,000. It appeared, therefore, as if the 
Reorganization Committee would have no difficulty in placing 
the finances of the Company on a secure footing, by merely 
liquidating the current assets and funding some of the liabili- 
ties. 5 The plan proposed was concerned entirely with a 

1 George C. Magoun of Baring. Magoun and Company, Ernst Thalmann of 
Ladenburg, Thalmann and Company, Gustav H. Gossler of G. Ainsinck and Com- 
pany. It was commonly believed that Thalmann did the real work of the reor- 
ganization. 

2 Report actually circulated some time before; summary in 56 Chron. 973, June 
10, 1893. 

3 Reorganization Committee Report, June 15, 1893, p. 1. 

4 The accountants, Deloitte, Dever, Griffiths and Company, reported, " We 
find the value of the Real Estate, Plant, Good Will, etc., as recorded on the Books 
of Account, to be $14,931,361." (Letter of Deloitte, Dever, Griffiths and Company 
to Reorganization Committee, 10th June, 1893.) On September 30, 1893, another 
accountant for the Receivers, Mr. Seaward, valued these same assets as $2,934,388. 
(Report of November 20, 1893.) 

6 The following is a brief summary of the balance sheet as certified to by De- 



34 THE NATIONAL CORDAGE COMPANY 

readjustment of the debt of the Company in such a way as to 
relieve the tension. 1 The proposition first advanced was simple. 2 
The Company was to create collateral trust, first mortgage 
six per cent bonds to the amount of $6,000,000 for which the 
stockholders were asked to subscribe at eighty-five per cent. 3 
A cash assessment of $20 per share was levied on the preferred 
stock, and $10 a share on the common stock. 4 In return for 

loitte, Dever, Griffiths and Company on the basis of the National Cordage Com- 
pany's books. (May 4, 1893) : — 

Assets 

Pledged as 

Collateral Free Total 

Cash $72,966 $72,966 

Customers' and agencies' open accounts $143,000 679,200 822,200 

Sub-company notes 497,475 382,087 879,562 

Customers' notes 16,500 126,776 143,276 

Miscellaneous contingent items 65,102 65,102 

Balance due from note-brokers 138,596 138,596 

Inventories, — hemp, sisal, rope, and binder twine 4,896,935 2,292,472 7,189,407 

Hemp at agencies and in transit 33i,i39 33i,i39 

Bonds of controlled companies (mostly Security Corporation) 344,000 82,025 426,025 

Assets of individual mills, in excess of their individual liabilities 395,384 395.384 

Total quick assets $5,897,910 $4,565,747 $10,463,657 

Book value of plant, good will, etc. ($337,500 of this, payments 
account of Security Corporation) 15,268,861 

Total nominal assets $25,732,518 

Liabilities 

Acceptances $1,209,724 

Collateral loans ._ 5,596,706 

National Cordage Company's single name paper 597,010 

Open accounts and contracts 957,604 

Notes and contingent liabilities of subsidiary mills 3,625,374 

Total quick liabilities $11,986,418 

Excess of assets over liabilities $13,746,100 

In addition one should remember that there was a contingent liability of $6,000,- 
000 on account of guarantee of Security Corporation's bonds. And it afterward 
developed that there were underlying purchase money mortgages on some of the 
mills amounting to $1,385,000. 

1 The Reorganization Committee desired to achieve the following four purposes : 

1. To fund a part of floating debt. 

2. To induce stockholders to provide new working capital. 

3. Creation of new preferred stock. 

4. Acquisition of additional properties. 

2 Contained in first circular of the Reorganization Committee, June 15, 1893. 

3 Underwritten at 80. (56 Chron. 1015.) When the stockholders refused to 
subscribe, the underwriters were relieved of their responsibility. This seems to 
have been due to the exigencies of the panic of 1893. 

4 Those of the common stockholders who declined to pay the assessment might 
surrender fifty per cent of their holdings. (Reorganization Plan, June 15, 1893, 
article 2.) 



THE NATIONAL CORDAGE COMPANY 35 

these assessments, it was proposed to issue new preferred stock. 1 
Had the full amount of cash been contributed by the stockholders, 
the corporation would have been supplied with $7,000,000 of 
new capital. This, with the money realized from the sale of 
the quick assets, would have put the finances of the Company, 
it was thought, in good form. 

Certain unforeseen circumstances, however, prevented the 
consummation of this plan. Most general, and perhaps most 
serious of these, was the continued depression of 1893. The 
banking community became thoroughly aroused over the mone- 
tary and financial situation; and the Receivers of the National 
Cordage Company were pressed for the immediate payment of 
the outstanding notes. Unfortunately for some of the creditors, 
certain of the notes were secured by direct Kens on specific 
quantities of cordage, which the bankers forced on the market; 
and, in consequence, the price of both hemp and cordage fell 
rapidly. 2 Orders were cancelled on account of the cumulative 
effect of the panic of 1893; creditors failed, so that what were 
considered perfectly good assets at the beginning of the year 
yielded but a small percentage of their face value. 3 On top of 
all these circumstances, certain revelations regarding the auditing 
methods of the Company, tended to aggravate the feeling of 
uncertainty. The first statement, made soon after the appoint- 
ment of Receivers, showed only the direct liabilities of the 
National Cordage Company. In due course of time, notes 
were presented for payment, uttered by the subsidiary com- 
panies, or by the Directors themselves 4 which the National 

1 To effect this, the preferred issue was to be increased from $5,000,000 to 
$8,000,000. 

2 Much was made by contemporary competitors of what they called the " bank- 
ers' twine," and the disturbance it created in the cordage market. The price, 
however, did fall to a low figure. Sisal hemp (largely used in binder twine) fell 
from 6| cents in January, 1893, to 3I cents in August, 1893. Of course the price 
of the twine itself fell correspondingly. J. M. Waterbury, testified before the 
Industrial Commission " binder twine which was worth, and would have sold, for 
about $6,000,000, sold for about $2,500,000." (XIII R. I. C. 134.) 

3 Accounts worth $1,851,076 were estimated by the Reorganization Committee, 
November 20, 1893, to be worth only $600,000. 

4 Intense feeling, and the most severe criticism were directed against the Presi- 
dent and the Treasurer, to whose lax methods and speculative propensities the 



36 TEE NATIONAL CORDAGE COMPANY 

Cordage Company had endorsed, but which were not entered 
on its books. The makers allowed these notes to go to protest, 
and the liability fell back on the parent Company. 1 These 
unrecorded liabilities, and other claims not known to the re- 
ceivers, amounted to over $1,500,000. To make conditions 
worse, the Directors having charge of the loan transactions had 
apparently deceived the bankers. The management had assured 
the bankers that immense quantities of binder twine had actually 
been sold and that the loans were against " bills receivable," 
not against inventoried merchandise the value of which was 
subject to a fluctuating market. Soon after the failure it de- 
veloped that many of these so-called sales were merely consign- 
ments to the consumer and to the western intermediary. The 
very large profits, supposed to have been made on binder twine 
were supposititious profits and should never have been treated 
as actually earned. The sale of these consignments after the 
failure, resulted in heavy losses. Furthermore, Mr Seaward, 
accountant for the Receivers, changed the fixed assets of the 
Company from $14,931,360 to $2,934,388 2 on the basis of a 
forced and immediate sale. 3 

As these unlooked for revelations came to light one after 
another, uncertainty regarding the true standing of the Company 
increased. Recognizing that a drastic readjustment would be 
necessary, the Reorganization Committee published a second 
circular, in November, 1893. This provided that the secured 
debt should be paid through the sale of the pledged assets. 4 

collapse was attributed. It should be said, however, that the Directors themselves 
had had faith in the Company to the very end, and lost practically everything in 
the collapse. The strain upon them was terrible. 

1 " A large number of debts, upon which the Company was only contingently 
liable as endorser, and which, therefore, did hot appear in the accounts as liabilities, 
and which were not expected to become liabilities, have become actual liabilities 
by the failure and default of the principal debtors." Reorganization Committee 
Circular to Creditors, November 20, 1893. Published in full, 57 Chron. 900. 

2 Reorganization Committee Circular to Creditors, November 20, 1893. 

3 " Upon the theory that the mills must be sold separately, at forced sale, upon 
a given date, without regard to the future use to be made of them." Reorganiza- 
tion Committee Circular to Stockholders, November 20, 1893. 

4 The secured debt amounted to $3,495,978, for which was pledged merchandise 
appraised, September 30, 1893, at $4,100,489. 



THE NATIONAL CORDAGE COMPANY 37 

It also proposed that the claims of the unsecured creditors ] 
should be met by the payment of twenty-five per cent in cash, 
ten per cent in Trust Liquidation Certificates to be redeemed 
through the liquidation of the open accounts, and sixty-five 
per cent in new bonds taken at their par value. The plan was 
recommended to the creditors through a " Bankers' Committee," 2 
and by the end of the year nearly all of them had assented. 3 

The new plan, reduced to its simplest terms, provided (a) For 
the formation of a new Company, to be called the United States 
Cordage Company, which should take over the assets of the Na- 
tional Company by a purchase of its property; (b) For the 
issue of $7,500,000, six per cent first mortgage bonds by the 
new Company, which should be used to pay sixty-five per cent 
of the unsecured debt, 4 and to refund $1,657,000 of underlying 
liens on the various mill properties. These bonds were secured 
by a mortgage on the mills and the intangible assets of the 
Company; (c) For the issue of $6,000,000 " guaranteed " first 
preferred stock, to be exchanged, at par, for the old Security 
Corporation's six per cent mortgage bonds. 5 Through the cancel- 
lation of these bonds, the Security Corporation was in a position 
to deed its eight mills to the new Company subject only to 
underlying mortgages of something less than $1,500,000; (d) For 
the issue of new second preferred stock, amounting to $8,000,000. 
Of this amount, $5,000,000 represented the preferred stock in 
the old Company, and $3,000,000 represented the cash assess- 
ments paid on the old stocks; (e) For the issue of about $875,581 

1 The unsecured debt amounted to $8,755,814, September 30, 1893. Later 
about $500,000 had to be added. 

2 George G. Williams, President, Chemical National Bank; George S. Coe, 
President, American Exchange National Bank; W. W. Sherman, President, Na- 
tional Bank of Commerce. 

3 December 23, 1893; $11,300,000 out of $12,750,000. 

4 Unsecured debt, September 30, 1893, $8,755,814; December 30, 1893, $9,300,- 
000 (approximately). 57 Chron. 1083. Add, also, interest to date of settlement. 
The amount actually issued in the first instance was $6,076,000 which is sixty-five 
per cent of $9,348,000. (Listing Application, New York Stock Exchange, May 1, 
1894.) 

6 Most of these Security Corporation bonds were held by the cordage men and 
the agreement of virtually all the bondholders was obtained before the announce- 
ment of the plan. 



38 THE NATIONAL CORDAGE COMPANY 

of temporary " Trust Liquidation Certificates " which should 
be redeemed, as rapidly as possible, by the liquidation of the 
open accounts. 

The new capitalization can be seen at a glance from the table 
which appears on the following page. 

The tabular diagram shows that, as far as the issued capitali- 
zation is concerned, the new Company was more heavily burdened 
than the old, — $41,500,000 for the new over against $32,657,000 
for the old. It would seem, too, that the total charges had been 
increased from $850,000 to $1,450,000. Yet, if we take into 
consideration the outstanding debt, not funded, as we certainly 
must do in comparing the liabilities of the two companies, just 
the opposite result appears. The floating and permanent 
obligations were actually reduced, — $39,375,000 for the new, 
over against $45,157,000 for the old Company. In a word, 
the reorganization turned upon the funding of the floating debt. 
As a result, the financial position of the Company became simpler 
and stronger. Its weak points lay in the large increase in cumu- 
lative charges on the two classes of preferred stocks and in the 
important fact that the reduction in capitalization and charges 
was not more drastic. 

By the middle of December, 1893, ninety per cent of the 
floating debt had assented to the plan of readjustment. During 
the time, ninety-nine per cent of the preferred stock, and ninety- 
six per cent of the common stock had been deposited under the 
Reorganization Agreement. The plan was, therefore, declared 
operative. The assets of the National Cordage Company were 
bid in at the Receivers' sale, by an attorney for the United States 
Cordage Company, for the sum of $5,ooo,ooo. 1 On December 
26, 1893, the United States Cordage Company was incorporated, 
and the new organization had actually assumed the management 
of the business by the beginning of the new year. The officers 
of the Company were selected from among the members of the 
Reorganization Committee, the advisory bankers, and the 
management of the Sewall and Day Mill, one of the later and 
most successful of the National Company's acquisitions. The 

1 57 Chron. 1083. 



THE NATIONAL CORDAGE COMPANY 



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40 THE NATIONAL CORDAGE COMPANY 

old officers of the National Cordage Company ceased to have 
any connection with the new concern. The reorganization 
involved, therefore, not only a readjustment of the finances 
of the Company, but also an abrupt change of management 
and policy. 

The United States Cordage Company acquired twenty-two 
mills. 1 During the first months of the Company's business, 
the market for cordage was very much depressed, on account 
of the quantity of twine deposited for collateral against the loans 
to the old National Company. The bankers who held this 
twine were anxious to realize upon it at the earliest moment. 
Subsequently, the tension was relieved through the formation 
of the Western Twine Company, 2 which assumed charge of this 
" Bankers' Twine." 3 Late in the year it was announced that 
the banking connections of the Company had been strengthened. 
It seemed on the whole, therefore, that the United States Cordage 

1 The following list of mills is entered merely to make the record complete: — 

Waterbury Mills, Brooklyn, N.Y. 
Wm. Wall's Sons, Brooklyn, N.Y. 
Tucker and Carter, Brooklyn, N.Y. 
Victoria Cordage Co., Dayton, Ky. 
Xenia Twine and Cordage Co., Xenia, Ohio. 
J. Rinek's Sons, Easton, Pa. 
Miamisburg Cordage Co., Miamisburg, Ohio. 
Miamisburg Binder Twine and Cordage Co., Miamisburg, Ohio. 
Elizabethport Cordage Co., Elizabethport, NJ. 
Hanover Cordage Co., Hanover, Pa. 
Donnell Cordage Co., Bath, Maine. 
Chelsea (formerly Suffolk), Chelsea, Mass. 
Sewall and Day Cordage Co., Allston, Mass. 
Boston Cordage Co., Boston, Mass. 
Laurence Rope Works, Brooklyn, N.Y. 
Standard Cordage Co., Boston, Mass. 
Middletown Twine Co., Middletown, Ohio. 
American Cordage Co. (Field Cordage Co.), Xenia, Ohio. 
New Bedford Cordage Co., New Bedford, Mass. 
Ohio Twine and Cordage Co., Xenia, Ohio. 
Chicago Cordage Co. (Wm. Deering and Co.), Chicago, 111. 
Galveston Rope and Twine Co., Galveston, Texas. 
Application for listing, New York Stock Exchange, May i, 1894, copy in 58 
Chron. 820. 

2 59 Chron. 740. 

3 XIII R. I. C. 134, 147, 149- 



THE NATIONAL CORDAGE COMPANY 4 1 

Company would be able to weather the depression following 
the crisis of 1893, in spite of the inheritance of debt from the 
old management. 

The real condition of the business, however, had not been 
improved. The severe losses which the old National Company 
had sustained in its over-purchases of hemp were, to a large 
extent, passed on to its successor. Nor was there a change 
for the better in the skill of management shown by the officers 
of the new organization. During 1894, the Company purchased 
85,000,000 pounds of hemp in a rapidly declining market. Its 
consumption was only 46,800,000 pounds. 1 The Company 
carried over to 1895, — allowing for stocks received from its 
predecessor, January 1, 1894, — 28,000,000 pounds of hemp 
and 24,600,000 pounds of rope and twine, all representing a 
cost price higher than the current market. In fact, the sales 
for the year 1894 amounted to less than $2,5oo,ooo, 2 and the 
purchases of raw material to over $3,5oo,ooo. 3 In order to 
finance these ill-advised operations, the Company became a 
heavy borrower, using as collateral for this all its available 
current assets. To make matters worse, the Company tied 
up more capital in plants. It bought the Pearson binder twine 
mill, in Boston, from the McCormick Harvesting Machinery 
Company, for $900,000/ of which $500,000 was paid in cash. 
This was done in the face of the heavy supplies of binder's twine 
which the bankers held over the market, and the clearly recog- 
nized fact that the United States Cordage Company was not 
then operating at its full capacity. 5 At the time it was tying 

1 Investigations by a Bondholders' Protective Committee of which Robert L. 
Niles was Chairman. Summary will be found in 60 Chron. 1106, June 22, 1895. 

2 $2,496,389, Bondholders' Protective Committee Circular (60 Chron. 1106). 
The Annual Report had shown sales amounting to $3,239,703. (1894, U. S. C. Co. 
Rep.) Summary, 60 Chron. 80. 

3 $3,683,120, Bondholders' Protective Committee Circular, 60 Chron. 1106. 
Annual report gave purchases of raw material as $3,453,173. (1894, U. S. C. Co. 
Rep.) 

4 1894, U. S. C. Co. Rep. 

6 The plant was really bought from the McCormick interests to exclude them 
from the binder twine market. Three years before J. M. Waterbury had testified 
that the Pearson mill was the largest eastern competitor of the National Company 



42 THE NATIONAL CORDAGE COMPANY 

up $500,000 working capital in the purchase of the Pearson 
mill, it found itself compelled to borrow $500,000 to meet the 
January, 1895, interest on its funded obligations. 1 Nor did the 
reorganized Company maintain its position in the industry. 2 
In the face of the depressed conditions of trade, new competition 
arose. The officers of the National Company, displaced by the 
new management of the Reorganization Committee, started 
to manufacture cordage under the old firm names. 3 The Ply- 
mouth and the Fitler Companies, never having been in the 
consolidation, acquired new vigor after the failure of the National 
Company. More threatening yet were the conditions in the 
binder twine trade. The two leading manufacturers of harvest- 
ing machinery were the Deering and McCormick Companies. 
The former had purchased millions of pounds of twine of the 
old National Company, but after the failure had found it very 
difficult to secure the fulfilment of its contracts. 4 On account 
of this difficulty and from a desire to be quite independent, 
Wm. Deering & Company commenced to manufacture its own 
binder twine. By refusing to guarantee its binders when used 
with other twine, the Deering Company was able to secure an 
advantage with the farmers over the independent mills. The 
McCormick interests followed a similar policy so that the United 
States Cordage Company found its twine market growing nar- 
rower and narrower. 

in the binder twine business. (Balch v. National Cordage Company.) The pur- 
chase did not achieve its end, as the McCormick interests established soon after- 
ward a new and thoroughly modern binder twine mill in Chicago. 

1 59 Chron. 740. 

2 Some of the officers of the new Company seemed to be affected by the same 
desire to obtain a monopoly of the Cordage business. For example, at one stage 
it was hoped to effect a combination with the Fitler, Tubbs, Plymouth and Pearson 
Companies, the four largest producers outside of the United States Cordage Com- 
pany (see 57 Chron. 257). 

3 For example, the Waterbury Company under J. M. Waterbury; William 
Wall's Sons Company under Frank T. Wall; and the Tucker and Carter Cordage 
Company under a son of John M. Tucker. The Elizabethport became the Whit- 
lock Cordage Company. The Waterbury Company actually offered its stock for 
public subscription in 1903. 76 Chron. 387, 439. 

4 Several suits were commenced, notably U. S. Circuit Court (Chicago), May 
12,1893. Later discontinued. 



THE NATIONAL CORDAGE COMPANY 43 

Beset by all these difficulties, the United States Cordage 
Company failed on June 3, 1895, in less than a year and a half 
after its organization. With the announcement of the Receiver- 
ship x came the announcement of a plan of reorganization involv- 
ing the creation of a new first mortgage which should be put 
ahead of the first mortgage bonds of the United States Cordage 
Company. 2 As soon as the financial distress of the Company 
was known, a Protective Committee 3 of the bondholders arose. 
The bonds of the Company had been acquired by bankers, in 
part payment of the unsecured debt of the old National Cordage 
Company. As bankers, they were very reluctant to allow a 
Reorganization Committee to place other bonds ahead of theirs, 
especially before they had had an opportunity to investigate 
the conduct of the business. Almost coincident with the bankers' 
" Bondholders' Protective Committee," another " Committee 
of Enquiry " 4 sprang into existence, backed largely by the 
preferred stockholders. Robert L. Niles, as Chairman of this 
Committee, solicited subscriptions 5 from all the security holders, 
in order to enable the Committee to prosecute a vigorous inves- 
tigation into all the affairs of the Company. The members of 
the " Bondholders' Protective Committee " reported a week 
after they had begun the investigation, that " your committee 
feel justified in advising you that they are unable to discover 

1 The Receivers were John I. Waterbury, President of Manhattan Trust Com- 
pany, and William E. Strong, a partner of Frank K. Sturgis. who, by request of the 
bankers, — who were under heavy advances to the Company, — had become 
President of the United States Cordage Company. The Receivers were, of course, 
friendly to the management, and they were appointed in the hopes of effecting a 
friendly reorganization. 

2 Announcement and brief summary of plan in 60 Chron. 1012, June 8, 1895. 

3 Dumont Clarke, American Exchange National Bank; R. M. Galloway, Mer- 
chant's National Bank; Ebenezer S. Mason, Bank of New York; Stuyvesant Fish, 
National Park Bank; Charles A. Vialle, National Bank of the Republic, Boston; 
George Ripley, Hide and Leather National Bank, Boston. Summary Statement, 
60 Chron. 1060, June 15, 1895. 

4 Robert L. Niles, Niles Brothers; Charles E. Orvis, Orvis Brothers and Com- 
pany; Josiah C. Reiff, Woerishoffer and Company; A. R. Pick, A. R. Pick and 
Company. 

5 Fifty cents per $1,000 bond; four cents per share first preferred; two cents 
per share second preferred; and one cent per share for the common stocks. 



44 THE NATIONAL CORDAGE COMPANY 

any sufficient ground to justify the proposal that you should 
exchange your first mortgage bonds for second mortgage income 
bonds. . . ." l Following this announcement, came a new plan 
of reorganization which differed in certain important respects 
from that of the Receivers. Both plans, however, were based 
on a belief that the United States Cordage Company was over- 
burdened with capitalization, and both looked toward the 
simplification of the finances of the Company, through the ex- 
tinction of the various classes of preferred stock. Both plans 
involved an assessment on the stockholders, and both proposed 
to create a new first mortgage. The two plans differed chiefly 
in the fact that the Bondholders' Committee proposed to create 
only two classes of securities, — first mortgage bonds and com- 
mon stock; whereas the Receivers proposed to interpose between 
the two classes, a new issue of income bonds. 

The Bondholders' Protective Committee's Plan proposed to 
give each bondholder of the old Company, without assessment, 
$600 in new bonds, and $400 in new stock. All the stocks were 
to contribute cash, but new bonds were to be issued for the 
amount of the payment. The first preferred was to be assessed 
$15 a share, and would receive $90 in new common stock; the 
second preferred $7.50, and receive $45 in new common; and 
the old common stock was to pay an assessment of $3.75, and 
receive $22.50 in new stock. In all the plan called for $6,250,000 
new first mortgage bonds, and $16,250,000 new stock, all of 
one class. The bonds were to bear five per cent interest for 
three years, and six per cent thereafter for the rest of their life. 2 
The Receivers' plan required the exchange of the old First 
Mortgage Bonds into new Income Bonds, and the creation 
of 3,000,000 of new First Mortgage Bonds to be given entirely 
for the assessments on the stocks. The first preferred stock 
was assessed $20, and received $80 in new common stock; 
the second preferred, $10, and received $40 in new stock; and 
the old common stock was assessed $5 a share, and received 

1 Report Bondholders' Protective Committee. Summary, 60 Chron. 1106, 
June 22, 1895. 

2 Bondholders' Protective Committee Plan and Agreement, Circulars. Brief 
summary in 61 Chron. 113. 



THE NATIONAL CORDAGE COMPANY 45 

$20 in new stock, — all in addition to the mortgage bonds 
representing the assessments. 1 The details of the two plans 
are most clearly understood from the table which appears on 
the next page. 

A comparison of the plans shows that on the whole the 
old bondholders were somewhat less favored in the Receivers' 
plan than in their own; yet it was obvious that everyone in- 
formed recognized that a drastic reduction in the outstanding 
securities was absolutely necessary. 

In the course of the next few weeks, it developed that the 
Receivers' plan was more acceptable to the great body of security 
holders. 2 The majority of bondholders preferred it because 
they obtained all bonds, rather than part stock, and the first 
mortgage bonds ahead of them were so few that they believed 
interest on the new income bonds not imperiled. The stock- 
holders preferred it because the necessary fixed charges, not 
including the income bond interest, were so small that they 
thought there was little probability of another reorganization. 
Also, the only first Hen bonds were represented by their own 
assessments, instead of partly by the refunded bonds of the 
old United States Cordage Company, as was contemplated 
in the Bondholders' Protective Committee plan. Whatever 
the various motives may have been, it became clear, by the end 
of August, that the Receivers' plan was securing the deposit 
of most of the securities. The Bondholders' Protective Com- 
mittee, therefore, withdrew its plan. 3 From this time on, 
all interests worked in harmony for the consummation of the 
Receivers' plan. A comparison of the capitalization of the old 
United States Cordage Company and the new Standard Rope 
and Twine Company, will show the drastic cutting down of 
capitalization which the execution of this plan involved. All 
securities were cut at least in half. (See table, page 47.) 

On November 8, 1895, the Standard Rope and Twine Com- 
pany was incorporated under the laws of New Jersey, and in due 

1 Reorganization Committee Circular, June 5, 1895. Brief summary in 60 
Chron. 1012. 

2 61 Chron. 70, 153, 198, 241. 3 61 Chron. 328. 



4 6 



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48 THE NATIONAL CORDAGE COMPANY 

course of time took over the best mills of the United States 
Cordage Company. The reorganization had cut the total 
capitalization in halves, reduced the necessary fixed charges 
from over $500,000 to less than $200,000 and furnished the 
Company with $3,000,000 of new capital. The prospects of 
success for the Company were the brightest since the failure 
of the National Cordage Company nearly three years before. 

It is not of great profit to follow in detail the uneventful, 
and on the whole, unfortunate, history of the Standard Rope 
and Twine Company. The Company took over from the United 
States Cordage Company only five mills. 1 Of these five, the 
Company operated only three, — the Sewall and Day mill, 
just outside of Boston, and the Waterbury and Laurence mills, 
in Brooklyn, New York. During the first year, the Company 
suffered from the keen competition of the newer mills, " and 
the pressure to distribute goods manufactured has been greater 
than ever before in the trade." 2 The Company sustained a 

1 The following facts are stated merely for record. The Receivers of the United 
States Cordage Company took over, after the failure of the Company, twenty-one 
mills: — 

1. Sewall and Day, Boston. n. Victoria, Dayton, Ky. 

2. Pearson, Boston. 12. Hanover, Hanover, Pa. 

3. Waterbury, Brooklyn. 13. Middletown, Middletown, O. 

4. Laurence, Brooklyn. 14. Ohio, Xenia, O. 

5. Elizabethport, Elizabethport, NJ. 15. Miamisburg, Miamisburg, O. 

6. Boston, Boston. 16. Miamisburg (2), Miamisburg, O. 

7. Standard, Boston. 17. Xenia, Xenia, O. 

8. Chelsea, Boston. 18. American, Xenia, O. 

9. Wm. Wall's Sons, Brooklyn. 19. Rinek, Easton, Pa. 
10. Tucker and Carter, Brooklyn. 20. Donnell, Bath, Me. 

21. New Bedford, New Bedford. 
Of these 21 mills, the Receivers of the United States Cordage Company deeded 
to the Standard Rope and Twine Company the first five. Subsequently, the Stan- 
dard-Boston Mills were acquired. The Chelsea, Wall, Tucker and Carter, and 
Victoria Mills, — numbers 8 to 11 inclusive in the above, — were deeded by the 
Receivers of the United States Cordage Company to the Cannabis Manufacturing 
Company, all of whose $200,000 capital stock was held in the treasury of the Stan- 
dard Rope and Twine Company. The remaining ten mills, — numbers 12 to 21 
inclusive, — were sold by the Receivers of the United States Cordage Company, 
and the proceeds used for paying the expenses of the reorganization; and the 
balance turned over to the Standard Rope and Twine Company's treasury. Report 
of Thompson Committee. 1901, S. R. T. Co. Rep. 10. 

2 1897, S. R. T. Co. Rep. 3. 



THE NATIONAL CORDAGE COMPANY 49 

deficit of over $400,000. During the succeeding years of the 
Company's history the business ran constantly behind, the 
deficit creeping up with each successive report. 1 

Moreover, the Company had not the loyal service of its chief 
officers. This is illustrated by two significant incidents. The 
first President, V. P. Travers, 2 proposed, in 1896, that the 
Company should take over certain processes controlled by 
him for forcing oil into rope. With this in view, a contract 
was entered into which permitted Mr. Travers to spend $25,000 
of the Company's money in perfecting his inventions. As was 
shown later, " he made engagements involving the Company 
in expenditure of a much larger amount." 3 The processes 
proved worthless, and the Company lost heavily, both through 
the cost of useless machinery, and the waste of the goods manu- 
factured. The President refused to bear the expense of the 
experiment, as his contract stipulated, and he resigned his 
position. Later he sued the Company, and the Directors com- 
promised for $10,000. The whole affair cost the Company 
$i26,402.93. 4 

1 1897 403,931 deficit. 1901 630,994 deficit. 

1898 233,563 profit. 1902 98,088 deficit. 

1899 75j55i profit. 1903 151,628 deficit. 

1900 2,042 profit. 1904 9,167 deficit. 

This unfortunate exhibit was not due to the conditions in the industry. During 
the last two years, for example, the Plymouth Cordage Company had been able 
to pay eight per cent dividends on $1,500,000 of capital stock, and to increase its 
surplus and reserve each year by upwards of $100,000. 

2 The bankers were in control of the Standard, and they wanted a " practical " 
cordage man for President, whom they could control. Mr. Grimwood, Secretary 
of the Fiber Club, was offered the position, but he declined, believing that he 
would not be allowed freedom. Vincent P. Travers, a competitor in the firm of 
Travers Brothers, established in 1871, was selected. Mr. Travers did poorly. 
Besides burdening the Standard Rope and Twine Company by his oiling machinery, 
he was accused, — with a good deal of evidence behind the accusation, — of dis- 
criminating against the Standard in favor of his own concern, turning the less 
profitable contracts toward the former and the more profitable ones toward the 
latter. After he was retired from the Standard, he became Treasurer of Travers 
Brothers. This concern failed. He became later an employee in a building in 
New York City. 

3 1900, S. R. T. Co. Rep. 6. 

4 1902, S. R. T. Co. Rep. 5. 



SO THE NATIONAL CORDAGE COMPANY 

In September, 1898, certain officers of the Standard Rope and 
Twine Company formed a selling agency for the purpose of 
handling the Company's product. The Union Selling Company, 
as this latter was called, 1 entered into a contract with the officers 
of the Standard Rope and Twine Company, by which the latter 
paid 7 J per cent commission on all sales. The contract was 
undoubtedly burdensome, 2 and pressure was brought to bear, 
in 1900, to ameliorate its conditions. Subsequently, the terms 
were changed so that the Cordage Company had to pay its 
selling agent $225,000 per annum, whether any sales were made 
or not, and \ cent on sales in excess of 45,000,000 pounds. 3 
This contract was even more onerous. 

Competition of the keenest character confronted the Company 
on every side. The Plymouth Cordage Company, the best 
managed concern in the trade, with a capital of $1,500,000, 
was doing a larger business than the Standard with a nominal 
capital of $20,000,000. The rejuvenated Waterbury, Tucker 
and Carter, Wall, and Whitlock Companies were increasing 
their sales at the expense of the Standard. New, well organized 
mills were springing up all over the country. The McCormick 
and Deering harvesting machinery companies, too, had all but 
driven the Standard Company out of the binder twine busi- 
ness. Under these conditions, the Standard Rope and Twine 

1 The President of the Selling Company was Thomas Russell, later President 
of the Standard Rope and Twine Company. The head of the sales department 
of the Standard Rope and Twine Company, — Charles E. Borden, became Vice- 
President of the Selling Company. The stock, $500,000, was secured by those 
close to the management of the Cordage Company. For example, William Bar- 
bour, one of the Reorganization Committee of the United States Cordage Com- 
pany and a Director of the Standard, was a large stockholder in the Union Selling 
Company. (Montgomery Circular, February 24, 1904.) 

2 This is clearly shown from the following figures, taken from a Stockholders' 

Committee Report. 

1897 1898 1899 1900 

Sales $3,542,353 $3,100,118 $4,999,275 $4,255,342 

Expenses of sales by Company itself 112,711 158,385 

Expenses of sales by Union Selling Company . 343 , 1 5 7 294, 1 68 

Thompson Committee Report. 1901, S. R. T. Co. Rep. 16. 
" Under all circumstances the Committee is of the opinion that it would be a 
judicious policy not to renew this contract." Ibid. 

3 Montgomery Circular, February 24, 1904. 






TEE NATIONAL CORDAGE COMPANY 5 1 

Company sank deeper and deeper into the quicksands. In 
March, 1904, the price of the first mortgage bonds declined 
to thirty-nine per cent and the income bonds had a nominal 
market of three per cent. 1 The stock was quoted at 75 cents 
a share. 2 

Even in this condition, the officers of the Company continued 
the struggle. They paid the August, 1904, coupon on the first 
mortgage bonds, and " made a Macedonian cry to their security 
holders ' Come over and help us.' " 3 During 1904, the officers 
tried at various times to hold a stockholders' meeting with a 
quorum present. Their continued failure shows the feeling 
of hopelessness in the minds of the stockholders. 4 Finally, 
on January 25, 1905, Receivers were appointed by the New 
Jersey Court, on petition of the Vice-President of the Com- 
pany. 

During the succeeding months, various committees were 
working on a Reorganization agreement. These efforts finally 
bore fruits in a plan which involved the sale of the assets of the 
Company to the Standard Cordage Company, and the absolute 
extinction of the stock of the Rope and Twine Company. This 
Reorganization plan, presently adopted, reduced the existing 
securities, from over $21,000,000 to a little over $8,000,000, and 
at the same time provided for over $1,000,000 of new capital. 
The plan in detail required that the old first mortgage bond- 
holders should surrender their bonds and pay an assessment 

1 It should be remembered that the first mortgage bonds represented actual 
cash contributed in the last reorganization, and the income bonds represented the 
funded debt of the bankers at the time of the National Cordage Company's re- 
organization. Briefly, a banker who took an old first mortgage bond of the 
United States Cordage Company in liquidation of his notes of the National Com- 
pany could now sell his $1,000 bond, if he found a customer, for $30. 

2 It is an interesting coincidence that at the very time the Standard Rope and 
Twine Company was struggling to maintain a position, the old John Good Com- 
pany's property, — both the machine works and the cordage mill, — were sold at a 
Sheriff's sale to creditors. 

3 Quotation from Cordage Trade Journal, October 6, 1904. XXIX C. T. J. 104. 

4 " Extraordinary efforts have been made to secure the attendance of the stock- 
holders, either in person or by proxy, at the Annual Meetings; three adjourned 
meetings being called last year, at none of which were there enough votes rep- 
resented to enable the meeting to be held." 1904, S. R. T. Co. Rep. 5. 



52 THE NATIONAL CORDAGE COMPANY 

of $262.50 1 for each $1,000 bond. In return, they received 
$850 in new first mortgage bonds, $775 in new income bonds, 
and $175 in new stock. The old income bondholders surrendered 
their bonds, and paid an assessment of $52.50 for each $1,000 
bond. They received $70 in new first mortgage bonds, $35 in 
new adjustment bonds, and $335 in new stock. 2 The old stock- 
holders received nothing. 3 The commendable features of the 

1 It was not called an assessment. The phraseology of the plan gave the old 
bondholders fifty per cent of their holdings in new first mortgage bonds, and sixty 
per cent in new incomes, " provided and upon condition that the First Mortgage 
Bondholders subscribe at 75 to new first mortgage bonds to the extent of thirty- 
five per cent of their holdings." For the above subscriptions they would receive 
" a fifty per cent subscription bonus in adjustment bonds, and a fifty per cent 
subscription bonus in stock." Reorganization Plan, December 12, 1905, p. 8. 
A very good digest of the whole plan is given in The Cordage Trade Journal, Decem- 
ber 21, 1905. XXXI C. T. J. 221. 

2 The old income bondholders were offered thirty per cent in new stock if they 
would subscribe to the extent of seven per cent of their holdings to new first mort- 
gage bonds at 75. For this, they were offered " bonuses " of fifty per cent of their 
subscription, in new income bonds, and fifty per cent in new stock. Reorganiza- 
tion Plan, December 12, 1905, pp. 8-9. 

3 In a polite circular, under date of October 30, 1905, the Income Bondholders 
and Stockholders Protective Committee informed the stockholders that, " not- 
withstanding their earnest, persistent and long continued efforts, they have been 
unable to obtain any recognition of the stock in any plan for the reorganization of 
your Company." The stockholders had no committee of their own. 

It should be remembered that a very large part of this stock was represented by 
the old preferred stock of the National Cordage Company, after numerous assess- 
ments. For purposes of illustration consider a private investor having bought 
ten shares of the National Cordage Company's preferred stock of Belmont and 
Company in 1890. In the reorganization of the National Company, he was com- 
pelled to buy twenty per cent more of the preferred stock, all of his holdings be- 
coming second preferred. He would, therefore, come into possession of twelve 
shares of the United States Cordage Company's second preferred stock, — cost 
$1,200. He received no dividends. In the reorganization of the United States 
Cordage Company, the second preferred stock was assessed $10 a share and re- 
ceived $10 a share of the First Mortgage Bonds of the Standard Rope and Twine 
Company and forty per cent of stock. The investor in question would be assessed 
$120, — making his actual investment $1,320. He received $120 in the Stan- 
dard Rope and Twine Bonds and $480 in stock. In the reorganization of the 
latter Company the stock was extinguished. The bonds were worth thirty-nine 
per cent and, if retained, would be subject to an assessment. The $120 in bonds 
represented an actual value to the investor of $46.80. Meanwhile, he would have 
lost the interest on the investment for upwards of twelve years. Taking this at 
the rate of five per cent the indirect loss amounted to $780. A man who invested 






THE NATIONAL CORDAGE COMPANY 53 

plan were, of course, the drastic reduction in outstanding securi- 
ties, and the provisions for new capital. 1 The surprising feature 
is that the holders of the bonds were willing to come forward 
and add more capital to an enterprise that had met with such 
repeated failure. (See table on next page.) 

The Standard Cordage Company, which gathered together 
the fragments of the Standard Rope and Twine Company, 
proved no more successful than its predecessors. 2 It led a 
precarious existence, operating only the old Sewall and Day 
plant, near Boston, and generally conducting its business at a 
loss. The net deficit had accumulated to over $600,000 3 by 
1910. In 191 2, the Receivers of the Company ceased the well- 
nigh hopeless struggle, disposed of the few remaining assets 
of the Company and entirely liquidated its affairs. 

It is not difficult to summarize the unfortunate, but somewhat 
remarkable history of the cordage consolidation. The manu- 
facture of rope and twine always has been, and still is, profitable. 
The industry is competitive and open to all. The raw material 
is bought in an open competitive market and the finished 
product is sold under conditions of keen competition. Under 
these circumstances a consolidation of manufacturing companies 
could be successful only if it had at its command distinctly 
superior business ability. In this asset, the single necessary 
condition for success, the National Cordage Company and its 
reorganized successors were wanting. Although many of the 
Directors of the National Cordage Company had been able 
manufacturers when their businesses were restricted to small 
compass, they failed to understand the responsibilities of a 

$1,000 in the first and underlying security of the National Cordage Company 
would, in 1905, have increased his actual investment to $1,320, and including 
interest to $2,100. For this he would have stock that was worthless and bonds 
having a market value of $46.80 and subject to a further assessment. 

1 The reorganization plan was subjected to a searching editorial criticism in the 
Cordage Trade Journal of December 21, 1905, in which it was contended that 
the plan was not sufficiently drastic. XXXI C. T. J. 230. 

2 In January, 191 2, its first mortgage bonds, valued by the Reorganization Com- 
mittee at 75, were sold for $22! (auction sale, January 12). Income bonds were 
freely offered at $35, and its stock had no purchaser at a dollar a share. 

» 1910, S. C. Co. Rep. 1. 



54 



TEE NATIONAL CORDAGE COMPANY 





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THE NATIONAL CORDAGE COMPANY $$ 

large organization. The President and " the manufacturing 
Director " devoted their attention to aspects of the Company's 
affairs for which they were untrained, — speculation in hemp 
and the securities of their Company. The President of the 
United States Cordage Company was a banker, placed in the 
position by the group of bankers who had made heavy loans 
to the Company. He was confessedly unfamiliar with the 
detail of a manufacturing business and with the cordage industry 
in particular. Overloaded with indebtedness inherited from the 
mismanagement of the previous years this organization failed 
in a year. The President of the Standard Rope and Twine 
Company divided his attention between the Company and 
another firm engaged in the same kind of business. Proving 
unsuccessful, he was succeeded by another man more interested 
in obtaining a profit for the Selling Agency, in which he was 
interested, than in the efficient administration of the Standard 
Rope and Twine Company. And the successors in the manage- 
ment of the Standard Cordage Company, were too heavily 
handicapped by a burden of debt and inefficiently equipped 
mills to make a successful struggle in a competitive field. 



SUPPLEMENT 

TO THE 

HISTORY OF THE NATIONAL 
CORDAGE COMPANY 

BY 
A. S. DEWING 



TABLE OF CONTENTS 

PAGE 

i. Account of the Cordage Industry 5 

2. Form of Trust Certificate 8 

3. Certificate of the Organization of the National Cordage 

Company 9 

4. Bankers' Circular offering the Preferred Stock to the 

Public 12 

5. Testimony concerning the Acquisition of one of the Orig- 

inal Companies 19 

6. Security Corporation Purchase Contract 23 

7. Bond of Security Corporation 27 

8. Extracts from Periodicals 30 

9. Annual Report to Stockholders 34 

10. Bill of Complaint for Appointment of Receivers .... 40 

11. A Newspaper Account of Failure 46 

12. Comment at Time of Failure 55 

13. First Reorganization Circular 58 

14. Reorganization Agreement 72 

15. Absorption of Security Corporation at Time of Reorgan- 

ization 86 

16. Appraisers' Report for Second Reorganization Circular . 91 

17. Second Reorganization Circular, Stockholders 93 

18. Second Reorganization Circular, Creditors 99 

19. Unsecured Creditor's Assent 108 

20. Industrial Commission Testimony no 

21. United States Cordage Company Reorganization Agree- 

ment 145 



EARLY HISTORY OF THE CORDAGE INDUSTRY 

By Benj. C. Clark 

Reprinted from " The Memorial Centennial of ioo years of American Commerce 
by ioo Americans" 18Q5. 

[5] l The first agreement between the cordage manufacturers was 
entered into February 23, 1861, the object being to correct certain 
abuses which had prevailed among firms engaged in the trade. 
Weekly meetings were held by the manufacturers in their respective 
cities, and opportunity afforded for any complaints or any suggestion 
about the condition of trade and the regulation of prices. The 
object, as stated by one of the Eastern manufacturers, was " to 
look each other in the face and maintain prices." Various amend- 
ments were from time to time made in this agreement of 1861, but 
in July, 1874, a careful revision was made and the manufacturers 
pledged themselves, " as men of honor and integrity," to the true 
and faithful observance of the rules. A stronger agreement was 
made in April, 1875; but complaints of underselling, answered with 
various excuses, were frequent, and, there being no pecuniary penalty, 
the ingenuity of the manufacturers finally hit upon what was known 
as the " pool system." This went into operation January 1, 1878. 
The business was divided among the manufacturers in proportions 
which seemed just, and when the business of one concern exceeded 
during any month the proportion which its share bore to the total 
business done, according to the returns, it would pay in so much 
per pound on the excess. In case a concern fell short it would be 
a recipient to that extent. 

It was supposed that this arrangement would act as a preventive 
to the cutting of prices, and it undoubtedly had that effect to some 
extent. The novelty of the plan was also in its favor, and on the 
whole it worked well enough amply to repay the great amount of 
labor expended in securing its adoption. The percentages ranged 
from eleven and one-fourth to one per cent. 

1 The figures in brackets indicate the original pagination of the sources 
reproduced. 



6 TEE NATIONAL CORDAGE COMPANY 

In 1880 the amount of the pool was reduced from two cents to one 
cent per pound, and in June of that year to one-fourth cent; but in 
January, 1881, the pool was abolished. In April, 1882, however, 
it was deemed best to re-establish it, and on the 28th of June the 
proportions were again agreed upon for three years. At the expiration 
of that time the new concerns which had grown up were taken into 
the association, and after much labor, lasting from February to July, 
1885, a new pool was formed, and the proportions as fixed by the 
committee were accepted. 

No one who was present will ever forget the magnificent banquet 
given at Long Branch, on the 29th of July, 1885, to the members 
of the association, by the Hon. Edwin H. Fitler, of Philadelphia, 
who, as president for many years, had been untiring in his efforts 
to unite the members and preserve harmony. Equal honor should 
be awarded to Mr. Frederick Davis of Sewall, Day & Company of 
Boston, and to Mr. D. B. Whitlock of New York, for many years 
secretary of the association, who died in 1888. 

[6] In April, 1887, before the expiration of the time agreed upon 
at the formation of the last pool, it was broken up; and the next 
event of great interest was the formation and incorporation of the 
National Cordage Company. This was composed of the four leading 
concerns in New York City; and although their circular, dated 
August 1, 1887, announced that their " large facilities and long- 
established reputation were a guaranty that they could fulfil all that 
they promised to do," yet the successful accomplishment of their 
aims would have demonstrated that the age of miracles was not 
wholly past. The projectors were, no doubt, sanguine enough really 
to believe that it was possible to control the product and prices of 
Manila and Sisal hemp, but the attempt was a failure. An effort 
was made to subsidize the houses and brokers engaged in the trade, 
but they did not remain subsidized, and the scheme would not work. 
In some remarks made by the writer, May 27, 1886, in the Old South 
Church, Boston, at a meeting called to discuss the Morrison tariff 
bill, he said; " The day of monopolies in this country is past, and 
there is no danger but that the competition among ourselves, with the 
wonderful and ever-increasing labor-saving appliances and econom- 
ical devices of the present day, will keep down prices, in our own 
products at least, to a reasonable point." 

Thus it was with the attempt alluded to. The time had gone 
by for any such arrangement to be more than temporary, and measures 



EARLY HISTORY 7 

to undermine the project were taken by those who did not propose 
to give up their individual judgment in purchasing raw material; 
and it is not strange that, with the immutable laws of trade working 
in their favor, these measures were at once and continually successful. 
The National Cordage Company was in the position of a whale 
attacked by swordfish. The whale was only one organization, and 
was cumbersome and unwieldy; the swordfish were numerous and 
extremely lively in their movements, and the result of the conflict 
was what might reasonably have been expected. The whale was 
exhausted by his attempts to maintain his ground, and what was 
bad rapidly became worse. In January, 1890, the National Cordage 
Company made an attempt to have all the manufacturers outside 
of their organization join them. But no one who joined the National 
knew the terms made with his neighbor, and it was not long before 
distrust and suspicion ruined the whole project. On the 4th of May, 
1893, the National passed into the hands of receivers, although they 
had paid eight per cent dividends from 1891 on their preferred, and 
from nine to ten and one-half per cent on their common stock, divi- 
dends having been declared on both, three days before their failure. 

It is too early to write the history of the United States Cordage 
Company, which organization succeeded the National Cordage 
Company. Circumstances scarcely controllable by any one resulted 
in disaster, and, in fact, its career was never much more than a con- 
tinued liquidation. A fall in the prices of raw material, unexpected 
and unprecedented, together with other misfortunes, culminated 
in the appointment of receivers, June 3, 1895. 



FORM OF TRUST CERTIFICATE 

NATIONAL CORDAGE ASSOCIATION 

Union Township, New Jersey, January 26, 1890 

This is to certify that 

Shares Company 

4667 is entitled to forty-six hundred and ) , e 

' . L > shares of one 

sixty-seven ) 

hundred dollars; each in the equity and to the 
property held by the National Cordage Association; 
transferable only on the books of said Association 
on surrender of this certificate; and in the 
manner prescribed in its by-laws. This certifi- 
cate is issued upon the condition that the holder 
or any transferee thereof shall be subject to all 
Picture of the provisions of the agreement creating said 
a palm tree Association and the by-laws adopted in pursuance 
thereof, as fully as if he had signed the same. 

National Cordage Association 

C. P. Marsh J. M. Waterbury 

Secretary Chairman 



CERTIFICATE OF THE ORGANIZATION OF THE 
NATIONAL CORDAGE COMPANY 

This is to certify that we, Walter Palmer, Robert T. Spencer, Willard 
P. Whitlock and William F. Miller, do hereby associate ourselves 
into a Company under and by virtue of the provisions of an Act 
of the Legislature of New Jersey, entitled " An Act concerning cor- 
porations " approved April 7th, 1875, and the several supplements 
thereto and acts amendatory thereof, for the purposes hereinafter 
mentioned, and to the end we do by this, our certificate, set forth: — 

First: — The name which we have assumed to designate such 
Company and to be used in its business and dealings is 

" The National Cordage Company." 

Second: — The places in this State where the business of such 
Company is to be conducted are; Union Township in the County 
of Hudson; Rutherford in the County of Bergen; Elizabeth in the 
county of Union and such other places as from time to time may be 
found convenient or necessary. 

The principal part of the business of said Company within this 
State is to be transacted at Union Township in the County of Hudson 
and the places out of this State where the same is to be conducted 
are the Cities of New York and Brooklyn in the State of New York; 
and in such other places in the several States of the United States 
and elsewhere as from time to time shall be found necessary or con- 
venient for the purposes of the Company's business. 

The objects for which the Company is formed are the manufacture 
and sale of cordage, binder twine and any and all other similar com- 
modities, including the acquisition by purchase, manufacture or 
cultivation of all materials, supplies, machinery and other articles 
necessary or convenient for use in connection with and in carrying 
on the business of manufacturing and sales as aforesaid; the acquisi- 
tion by purchase, lease or other contract of all necessary or convenient 
lands and premises, with buildings and machinery for the purpose 
of such manufacture, together with all necessary and convenient 
means for the economical transportation of all supplies, machinery, 

9 



IO THE NATIONAL CORDAGE COMPANY 

raw materials and their products, and to this end the acquisition 
of such boats and vessels and facilities therefor and the use thereof 
as the Company may deem necessary from time to time; the arrange- 
ment by contract for the use of premises by others in the manufacture 
of commodities as aforesaid for the use and benefit of the Company 
and the supply of material, machinery and other facilities therefor; 
and in general, the engagement in any and all lawful business whatever 
which may be found convenient or necessary in and about the manu- 
facture and sale as aforesaid as well by the Company as through 
and by means of other persons, firms or corporations throughout 
the State of New Jersey and other State and elsewhere as aforesaid. 

The portion of the business of the Company which is to be carried 
on out of this State is the manufacture and sale of the various com- 
modities above mentioned and in addition such and so much of the 
business connected therewith and hereinbefore described, as the 
Company may from time to time find convenient or advantageous, 
by reason of locality or other conditions or circumstances at any time 
during the life of the Company, existing. 

Third: — The total amount of the Capital Stock of said Company 
is Two Million Five Hundred Thousand Dollars; divided into twenty- 
five thousand shares of the par value of One hundred dollars each. 

The amount with which said Company will commence business 
is One Million Dollars ($1,000,000) divided into Ten Thousand 
(10,000) shares, of the par value of One Hundred Dollars each. 

Fourth: — The names and residences of the stockholders and the 
number of shares held by each, are as follows, to- wit: — 

Walter Palmer Brooklyn, N. Y. 2495 shares- 

Robert T. Spencer Brooklyn, N. Y. 2495 shares- 

Willard P. Whitlock Elizabeth, N. J. 2495 shares- 

William F. Miller Brooklyn, N. Y. 2495 shares- 

Thomas Stanleigh Brooklyn, N. Y. 4 shares- 

Robert B. Gilmour Brooklyn, N. Y. 4 shares- 

Charles D. Orth New York, N. Y. 4 shares- 

Francis Gilbert East Orange, N. J. 4 shares- 

Edwin R. Brinkerhoff Ludlow, N. Y. 4 shares- 

Fifth: — The period at which said Company shall commence is 

the 2 1 st day of July 1887, and the period at which it shall terminate 

is the 21st day of July 1937. 



CERTIFICATE OF THE ORGANIZATION II 

In witness whereof, we have hereunto set our hands and seals 
the 18th day of July 1887. 

Signed sealed &c in Walter Palmer L.S. 

the presence of Robt. T. Spencer L.S. 

John W. Heck Willard P. Whitlock L.S. 

Wm. F. Miller L.S. 
State of New York. 1 

r SSI — 

City and County of New York. J 

Be it remembered that on this Eighteenth day of July 
1887, before me John W. Heck a Master in Chancery of the State of 
New Jersey personally appeared Walter Palmer Robert T. Spencer 
Willard P. Whitlock and William F. Miller who I am satisfied are 
the persons named in and who executed the foregoing Certificate, 
and I having first made known to them the contents thereof, they 
did each acknowledge that they signed, sealed and delivered the 
same as their voluntary act and deed. 

John W. Heck 
Master in Chancery N. J. 

Endorsed. " Recorded in Hudson Co N. J. Clerks office July 20 
1887 in Clerks record No 6 

Dennis Mclaughlin 

Clerk." 
Endorsed. " Filed July 20 1887 

Henry C. Kelsey 

Secretary of State" 



CIRCULAR OFFERING STOCK TO PUBLIC 

Messrs. August Belmont & Co., New York. 
Messrs. Vermilye & Co., New York. 



SUBSCRIPTION FOR 

$5,000,000 OF 8% CUMULATIVE PREFERRED STOCK 



THE NATIONAL CORDAGE COMPANY 

Incorporated under the Laws of the State of New Jersey 



DIRECTORS 



James M. Waterbury, President, Of L. Waterbury & Co. 

Frank T. Wall, Vice-President, Of William Wall's Sons. 

Elisha M. Fulton, Treas., President of the Elizabethport Cordage Co. 
Caleb P. Marsh, Sec., President of The Tucker & Carter Cordage Co. 
John A. Tucker, Treasurer of The Tucker & Carter Cordage Co. 

Chauncey Marshall, Of L. Waterbury & Co. 

Willard P. Whitlock, . . . Treasurer of Elizabethport Cordage Co. 



REGISTRAR OF TRANSFERS 

Farmers' Loan & Trust Company, New York. 



ATTORNEYS 

Betts, Atterbury, Hyde & Betts, Equitable Building, N. Y. 



CAPITAL STOCK, .... $15,000,000. 

DIVIDED INTO 

50,000 Shares 8% Cumulative Preferred Stock, of $100 each $5,000,000 

100,000 Shares Common Stock (all of which has been issued as full-paid 
stock), of $100 each $10,000,000 



OFFERING STOCK TO PUBLIC 1 3 

The Preferred Stock now offered is issued full-paid for cash, is 
non-assessable, and carries no personal liability to stockholders. 

The Company has no bonded or mortgage debt, and the creation 
of any such debt, except with the consent of holders of record of at least 
eighty per cent. (80%) of the preferred stock, is prohibited by by-law. 

The Preferred Stock is entitled to a preferential cumulative 
dividend of 8 per cent, per annum, accruing from November 1st, 
1890, and payable out of the net earnings of the Company before 
any dividends are paid upon the Common Stock; and the Preferred 
Stock will also have priority over the Common Stock in respect 
of all property and assets of the Company, in case of liquidation 
or dissolution. 

The two classes of stock have the same voting power per share. 

Preferred dividends will be payable quarterly on the first days of 
November, February, May and August of each year, and the trans- 
fer books will close fifteen days prior to the date of payment. 

Both classes of stock will be registered at the office of the Farmers' 
Loan and Trust Company of New York, and application will be 
made to list them on the New York, Boston and Chicago Stock 
Exchanges. 

After the payment of 8 per cent, cumulative on the Preferred 
Stock and 12 per cent, non-cumulative on the Common Stock, and 
the reservation of such surplus as may be determined by the Board 
of Directors of the Company, any further dividends will be divided 
pro rata between the two classes. 

The organization of the Company and the legal validity of the 
Preferred Stock issue now offered have been submitted by the 
Bankers to their counsel respectively, and approved, as will appear 
from the following opinions: 

Opinions of Counsel 

Drexel Building, 
New York, Oct. 9th, 1890. 
To Messrs. August Belmont & Co.: 

We have, as requested by you, examined the organization of The National Cor- 
dage Company, and its issue of Preferred Stock. It is our opinion that the organi- 
zation is regular and the stock issue valid; and that the holders of said stock will 
be legally secure in the rights and immunities set forth in your Prospectus of this 
date. 

Lowrey, Stone & Auerbach. 



*" 



14 THE NATIONAL CORDAGE COMPANY 



54 Wall Street, 
New York, Oct. 9th, 1890. 
Messrs. Vermilye & Co., 

Gentlemen: We have investigated the organization of The National Cordage 
Company, and the proceedings attending its issue of Preferred Stock. 

We advise you that the organization of the Company and the issue of Preferred 
Stock are valid in law, and that the holders of such stock will be entitled to the 
privileges and immunities stated in the Prospectus. 

Very truly, 

Butler, Stillman & Hubbard. 



Prospectus 



The National Cordage Company is a corporation organized 
under the laws of the State of New Jersey, for the importation of 
hemp and the manufacture and sale of cordage. 

This industry is staple and one of the oldest in the United States; 
the volume of the business has increased rapidly during the past 
twenty years, and under the present plan of operations should be 
capable of still more profitable expansion, while furnishing as cheap 
if not cheaper product to the consumer. 

The Company, in addition to its large working capital, has con- 
tracts for the fee of the following manufacturing properties, which 
are now under lease to it, free of mortgage or other encumbrance: 

L. Waterbury & Co Brooklyn, N. Y. 

William Wall's Sons Brooklyn, N. Y. 

Elizabethport Cordage Co Elizabethport, N. J. 

The Tucker & Carter Cordage Co Brooklyn, N. Y. 

Geo. C. Pooley & Sons Buffalo, N. Y. 

Xenia Twine & Cordage Co Xenia, O. 

J. Rinek's Sons, Easton, Pa. 

Akron Twine & Cordage Co Akron, Ohio. 

in addition to which the Company controls the manufacturing 
properties of the 

Victoria Cordage Company Dayton, Ky. 

H. R. Lewis & Co Philadelphia, Pa. 

Baumgardner, Woodward & Co Philadelphia, Pa. 

New York Cordage Co New York City. 

Atlas Cordage Co New Orleans, La. 

Randall, Goodale & Co Boston, Mass. 



OFFERING STOCK TO PUBLIC 1 5 

Many of these concerns have been in business for half a century, 
and are well known to the business community of this and other 
cities. 

The proceeds of the Preferred Stock will be paid over to the Com- 
pany, to be applied by it to the consummation of these several 
contracts, and to other purposes determined by the corporation. 

With the exception of the four manufacturing properties last 
mentioned, the former managers or proprietors of the several concerns 
are under contracts with the Company for long terms to run the 
respective mills under a system of competitive bids, the raw material 
being furnished by the Company and awards being made to the 
lowest bidders. The contractors, whether successful or unsuccessful 
in bidding, are under obligation by the same contracts to maintain 
the mills at their own expense in a fit state of efficiency for the next 
annual competitive bid, in which they are obliged to take part. 
The Company is thus under no expense for idle mills, while the 
skill of the business is retained. All the economies of consolidation 
are secured by this plan of organization, as well as the wholesome 
effect of free and keen competition among the manufacturers, result- 
ing in lower prices to the public, without decreasing the profit to 
the Company. 

The Company buys a very large percentage of all the fiber used 
in this country for cordage and binder twine. On this account it 
has great influence in the markets of the world for fiber, and the size 
of its contracts with the producing countries enables the Company 
to obtain correspondingly favorable prices. 

The Company has in addition other valuable contracts and con- 
cessions. 

A Committee, composed of the President, the Secretary and three 
Directors of the Company, has, during August of this year, inven- 
toried the assets of the Company, and reported to the stockholders 
that the value of the assets, exclusive of the proceeds of the $5,000,- 
000 Preferred Stock to be issued, is $12,000,000 and upwards, over 
and above all liabilities. 

Affidavits of the foregoing Committee, submitted to the bankers, 
and which are satisfactory to them, are the basis for the essential 
statements of facts herein concerning the character and volume 
of business of the corporation, its assets and method of operations; 
and, in the opinion of the undersigned, fully justify these statements 
and the conclusions drawn from them. The affidavits further show 



1 6 THE NATIONAL CORDAGE COMPANY 

that the annual aggregate profits of the several concerns for the past 
ten years have been more than enough to pay the annual dividend on 
the Preferred Stock and leave a very large surplus, notwithstanding 
the fact that during some of that period the interests now consolidated 
were in competition of a character now avoided. 

The Committee further certifies that at no time within the past twenty- 
five years have the aggregate annual profits of the several concerns been 
insufficient to pay the 8 per cent, dividend on the Preferred Stock, 
although the consumption of cordage at the beginning of that period 
was only one-quarter what it is to-day. 

The Common Stock remains in the possession of those interested 
in the property and management. 

By direction, and on behalf of the Corporation, we invite sub- 
scriptions to the above-mentioned Preferred Stock at par, payable 
as follows: 

5 per cent, on application; 
25 per cent, on allotment; 
35 per cent, on November 3rd; 
35 per cent, on November 17th. 

Allottees will have the option of paying in full on allotment, and 
interest on the anticipated payment will be allowed at the rate 
of 4% per annum. 

Temporary receipts will be given by the Bankers for instalments 
as paid, exchangeable into preferred stock on November 17th, the 
date fixed for the payment of the final instalment. 

The right is reserved to reject any subscriptions and to make 
allotments of less amounts than the amounts applied for. In allot- 
ment, preference will be given to dealers in cordage and others 
more directly interested in the business. If the whole amount 
applied for by any applicant be not allotted, the surplus amount 
paid on application will be applied upon the sums due on the allot- 
ment. When no allotment is made, the deposit will be returned 
in full. 

Failure to make payment of any instalment may operate as a 
forfeiture of all previous payments. 

The subscription list will be opened simultaneously at 10 o'clock 
a.m. on Tuesday, the 14th day of October, and close at 3 o'clock 
p.m. on Wednesday, the 15th day of October, 1890, at the 
offices of 



OFFERING STOCK TO PUBLIC 1 7 

August Belmont & Co., 23 Nassau Street, New York, 
Vermilye & Co., 16 and 18 Nassau Street, New York, 

and by 

Franklin Trust Co., Brooklyn, N. Y. 
International Bank, Chicago, Ills. 
First National Bank, Cincinnati, Ohio. 
National Bank of Commerce, St. Louis, Mo. 

Prospectuses and forms of application can be obtained at the 
offices above mentioned, where subscriptions will be received. 

The subscription for the entire amount of the Preferred Stock above 
offered has been guaranteed by underwriters in this country and abroad. 

New York, Oct. 9th, 1890. 

Form of Application 



THE NATIONAL CORDAGE COMPANY 



Issue of $5,000,000 of 8% Cumulative Preferred Stock 

Gentlemen: 

hereby apply for Shares, at the par thereof, of 8% 

Preferred Stock of THE NATIONAL CORDAGE CO., amounting to 

$ and enclose 5% deposit, or $ , required on 

application hereby agree to take any part or all of the stock 

allotted to hereunder, in accordance with terms of your Pro- 
spectus of Oct. gth, i8qo. 
Payments to be made as follows: 

5% on Application. 

25% on Allotment. 

35% on November 3d, i8qo. 

35% on November ijth, i8go. 

Allottees have the option to pay in full on allotment, and interest on 
the anticipated payment will be allowed at the rate of 4% per annum. 
If no allotment be made the deposit will be returned in full. 

Failure to make payment of any instalment may operate as a for- 
feiture of all previous payments, and of all allotment rights. 



1 8 THE NATIONAL CORDAGE COMPANY 

Temporary receipts will be given by the Bankers for instalments as 
paid, exchangeable into Preferred Stock on November 17th, the date 
fixed for the payment of the final instalment. 

Signature 

Date 

Address 

To 

August Belmont & Co., 23 Nassau St., New York City 
Vermilye & Co., 16 & 18 Nassau St., New York City. 



TESTIMONY CONCERNING THE ACQUISITION OF 

ONE OF THE ORIGINAL COMPANIES BY THE 

NATIONAL CORDAGE COMPANY 1 

Q. (Wm. N. Cohn for plaintiff.) What was the relation to the 
Elizabethport Cordage Company of the National Cordage Company 
from its inception ? — A. (James M. Waterbury.) It was leased by 
the National Cordage Company. 

Q. What were the terms of that lease ? — A. It was a 99 years' 
lease and they had a working contract under which they manu- 
factured for the National Cordage Company under an annual bid, 
a competitive bid, and failing to receive a contract they were obliged 
to close down at their own expense for the year. The idea was that 
they would be forced to bid sufficiently low to enable them to run 
and consequently the National Cordage Company would have its 
goods made at a very reasonable price; that was the consideration 
at that time. 

Q. How did you become possessed, or how did you purchase the 
Elizabethport Cordage Company ? — A. We issued stock to them 
and took a deed to their property. 

Q. What was the consideration that was given to the Elizabeth- 
port Cordage Company on getting control of its property by the 
Cordage Company ? — A. I don't remember the amount of the stock 
of the National Cordage Company. [Objected to as irrelevant, by 
Mr. Landabury.] 

Q. Do you know what its earnings were — on what basis did the 
National Cordage Company figure in the acquisition of the Elizabeth- 
port Cordage Company, if you don't know what its earning capacity 
was ? — A. I am not personally familiar with it. At the time we 
figured up the value of the product — its earning capacity and the 
product. Those figures have gone out of my mind. 

1 Testimony taken in the litigation between the National Cordage Company 
and one of its stockholders. Evidence in Balch v. National Cordage Company, 
New Jersey Court of Chancery, before Commissioner C. N. Williams, October 
17th, 1892. 

19 



20 THE NATIONAL CORDAGE COMPANY 

Q. . . . You don't remember the dividend earned by the Elizabeth- 
port Cordage Company at the time you acquired it ? — A. I have 
no recollection of it. 

Q. Your books will show ? — A. Our books will not show. 

Q. Won't your minutes or the records of your meetings show the 
condition of the Elizabethport Cordage Company at the time that 
the National Cordage Company acquired it ? — A. I don't think 
they will. 

Q. Were any representations made to you by the Elizabethport 
Cordage Company as to their condition ? [Objected to as irrelevant.] 
— A. Undoubtedly there was, but I don't remember it. It is some 
years ago. 

Q. The agreement by which you acquired possession of the Eliza- 
bethport Cordage Company, was that in writing ? — A. I should 
think not; I think it was a matter of negotiations where we finally 
settled upon an amount. 

Q. Can you tell me the consideration that was paid ? — A. I 
cannot. 

Q. You don't remember then the amount of stock that the National 
Cordage Company issued to the Elizabethport Cordage Company for 
the control of the latter's property ? — A. I do not. 

Q. Not even approximately ? — A. I think it was between two 
and three millions of dollars, but there was some common and some 
preferred, and I can't remember — 

Q. And you don't remember the proportions of each ? — A. No, 
sir. 

Q. Was there any fixed value put on the National Cordage Com- 
pany's stock at that time, at which it was to be taken by the 
Elizabethport Cordage Company ? — A. No value was mentioned 
as far as I remember. 

Q. Do you remember whether it was valued ? — A. Probably 
people in their own minds valued it, but the negotiations were not 
in that way. 

[Mr Waterbury then stated that he had brought the certificates, 
showing the transfers of stock of the National Cordage Company 
in which the Elizabethport Cordage Company was interested, called 
for in the subpoena that was served on him. These certificates were 
three in number, and were later offered in evidence by Mr. Cohn, 
and were marked complainant's exhibits Nos. i, 2 and 3. The first 
certificate was for 23,878 shares of the common stock of the National 



TESTIMONY CONCERNING ACQUISITION 21 

Cordage Company issued to the Elizabethport Cordage Company 
on February 24, 1891, signed by J. M. Waterbury, President, and 
E. M. Fulton, Treasurer, countersigned by John C. Furman; trans- 
ferred to L. Waterbury & Co., for value received on February 24, 1891, 
signed by the Elizabethport Cordage Company, E. M. Fulton, 
President; and marked cancelled by the Farmers' Loan and Trust 
Co., March 2, 1891.] 

Q. Now, in the acquisition of this property, as well as of others, 
you had some principle upon which you purchased, did you not ? 

— A. I think it was; principally productive capacity was our great 
principle. 

Q Aside from the earning capacity ? — A. Principally the pro- 
ductive capacity. We knew that under our management capacity 
would be equalized. 

Q. There is an underlying principle in the acquisition of these 
properties, I believe. You say that was the productive capacity. 
Now, do you know what the productive capacity of the Elizabethport 
Cordage Company was at the time of the acquisition ? — A. I don't 
remember now. I merely know it was a very large mill. Since then 
it has burned down you know. 

Q. What was the consideration paid by L. Waterbury & Co., to 
the Elizabethport Cordage Company for the transfer of this certif- 
icate of stock of the National Cordage Company for 23,878 shares ? 

A. That I will have to refuse to answer by advice of counsel as 
being irrelevant. 

Q. These two certificates, one of common stock for 95 shares and 
numbered C 195, dated May 4th, 1891, and the other for preferred 
stock, 53 shares, numbered A 498, and dated May 5th, 1891 — is that 
all the stock of the National Cordage Company that was ever issued 
to the Elizabethport Cordage Company, together with this large cer- 
tificate of course ? — A. I believe so. 

Q. And no more than 53 shares of preferred stock was ever 
issued to the Elizabethport Cordage Company or to any one in its 
behalf on the consummation of this arrangement between the Eliza- 
bethport Cordage Company and the National Cordage Company ? 

— A. There must have been some preferred stock issued to some 
one in its behalf; I thought you meant strictly to the Elizabethport 
Cordage Company. 

Q. Was there any common stock issued to any person in behalf 
of the Elizabethport Cordage Company other than those certificates 



22 THE NATIONAL CORDAGE COMPANY 

to which I have referred on the consummation of this deal between 
the Elizabethport Cordage Company and the National Cordage 
Company ? — A. I have answered those other questions wrongly. 
The preferred stock was all issued publicly by Belmont & Co., and the 
proceeds of it were paid over to the Elizabethport Cordage Company. 
Any preferred stock that they got — I just remember now — they 
must have subscribed for through Belmont & Co. 

Q. Do you mean to say that any interest that the Elizabethport 
Cordage Company got in the preferred stock of the National Cordage 
Company they got in cash and not in preferred stock ? — A. Yes, 
that expresses it better than I did. Except I say — the exception 
was that they did not have any interest in the preferred stock but 
they did receive cash — certain amount of cash for their properties. 

Q. Now that there be no mistake, was there beside this common 
stock issued to the Elizabethport Cordage Company, any cash paid 
by the National Cordage Company on the consummation of this 
deed in 1891 ? — A. There was cash paid or agreed to be paid. 

Q. How much was that ? [Objected to as irrelevant.] — A. I 
know it was a large amount; I don't remember the figures. I should 
say altogether they have been paid half a million dollars. 



SECURITY CORPORATION PURCHASE CONTRACT 

This Contract made the 2d day of November, 1891, between the 
firm of L. Waterbury & Co., of the City of New York, party of the 
first part, The Security Corporation, a corporation organized 
under the laws of the State of New Jersey, party of the second part, 
The National Cordage Company, a corporation organized under 
the laws of the State of New Jersey, party of the third part, and 
The Manhattan Trust Company, a corporation organized under 
the laws of the State of New York, party of the fourth part, WIT- 
NESSETH: 

Whereas, The said firm of L. Waterbury & Co., party of the 
first part, have acquired certain Cordage and Binder Twine Plants, 
Mills and property, machinery and took appurtenant thereto, 
suitable for the manufacture of Cordage and Binder Twine in the 
United States, a schedule whereof is hereto attached marked " A; " 

And whereas, The Security Corporation, party of the second 
part, has agreed to purchase the properties aforesaid from the said 
L. Waterbury & Co., and issue its bonds in payment thereof, to the 
amount and in the form and manner herein stated, and to ultimately 
dispose of and transfer the same as hereinafter provided; 

And whereas, The National Cordage Company, party to the 
third part, incorporated, among other things, for the manufacture 
and sale of Cordage and Binder Twine throughout the United States, 
is amongst other things empowered to acquire by purchase, lease or 
otherwise, Cordage and Binder Twine Mills, Plants, Real Estate, 
Machinery and other property appurtenant to or suitable for its 
business, throughout the States of the United States and elsewhere, 
and for the purpose of extending and enlarging its business, desires 
to secure the right to the present use and control of the property 
so to be conveyed to said Security Corporation, with a view to the 
management and operation of the same pending the acquisition 
of the full and absolute title thereto, on compliance with its covenants 
and agreements in that behalf to be made, as set out herein, and in 
the schedules annexed hereto; 

And whereas, Certain incumbrances and liens by way of mort- 
gage, pledge or otherwise, exist and are outstanding upon certain 

23 



24 THE NATIONAL CORDAGE COMPANY 

of the properties mentioned in Schedule " A," and which have not 
yet matured, for which reason the said properties cannot be freed 
therefrom, a statement of which incumbrances, with the date, 
amount and terms of each respectively are set forth in Schedule 
" B " hereto attached: 

NOW TO THE END AFORESAID, and IN CONSIDERATION OF THE 

premises and their mutual covenants, the parties hereto agree as 
follows : 

First. — The said firm of L. Waterbury & Co., hereby agrees 
to sell and convey, and the Security Corporation hereby agrees to 
purchase each and all of the properties mentioned and described 
in said Schedule "A" hereto attached, subject to the several incum- 
brances and liens thereon appearing in Schedule " B," at and for 
the sum of six million dollars, payable in bonds of said Security 
Corporation of the denomination of one thousand dollars each, 
at par or their face value, in the form hereto attached marked 
Schedule " C," and secured in the manner hereinafter provided, 
all of which said bonds shall be delivered to the party of the first 
part upon the execution and delivery of conveyances and transfers 
of the properties aforesaid, or as soon thereafter as the same can 
be done, except as to one million six hundred sixty-five thousand 
dollars of said bonds at their par or face value, being the aggregate 
amount of said outstanding liens and incumbrances mentioned 
in Schedule " B," which latter bonds shall be delivered by the said 
Security Corporation to the Manhattan Trust Company, Trustee, 
party of the fourth part, who shall hold and apply the same to paying 
off and discharging the said liens and incumbrances from time to 
time as the same become due and payable, as hereinafter provided, 
and until the same shall have been paid and discharged shall apply 
the interest thereon to keep down the interest on the said out- 
standing liens and incumbrances; Provided, however, that at any 
time the said firm of L. Waterbury & Co., on paying off any of said 
liens and incumbrances so shown on Schedule B, and discharging 
the lien thereof, shall thereupon on producing proof thereof to the 
Trustee be entitled to have and receive of the said Trustee an 
amount of said bonds equal to the principal sum of any such lien 
or incumbrance so paid off and discharged, interest coupons prior to 
the last day of payment to be detached and cancelled, and the coupon 
next falling due to be adjusted. 



PURCHASE CONTRACT 2$ 

It is further agreed that a rateable part of the interest on the liens 
and incumbrances to the date of the conveyances and transfers 
shall be assumed and discharged by the said firm, the party of the 
first part. 

It is further agreed that any of said bonds so deposited may at 
any time be sold by the Trustee, with the consent and at prices 
approved by the parties of the first and third part, but not less 
than par and accrued interest, and the proceeds thereof invested 
in the securities and in the manner authorized by Paragraph of 
Schedule " E " attached hereto, being the provisions governing 
the investment of moneys for the sinking fund in case bonds secured 
by the mortgage to the party of the third part be not purchased by 
the Trustee, in which case any funds on hand shall be first applied 
in payment of said maturing lien or incumbrance, and in case 
no sufficient amount of funds be on hand, then sufficient of said 
securities shall be sold by the party of the third part to pay the same. 

Second. — Upon the execution and delivery of the conveyances 
and transfers to the Security Corporation aforesaid, it shall execute 
and deliver to the National Cordage Company, a lease or leases 
of the properties so as aforesaid conveyed or transferred to it, for 
the term of 20 years from and after the 1st of November, 1891, 
and in the form hereto attached marked Schedule " D." 

Third. — For the purpose of securing the payment of the principal 
and interest of the bonds to be issued by it as aforesaid, the said 
Security Corporation shall execute and deliver to the said Man- 
hattan Trust Company, as Trustee, a deed of trust or mortgage of 
all of the properties so conveyed or transferred to it; but subject, 
however, to the lease of the same to the National Cordage Company 
aforesaid, the form of which deed of trust is hereto attached marked 
Schedule " E," and shall in said mortgage or otherwise secure such 
bonds upon all the rights and privileges of the said Security Corpora- 
tion under said lease. 

Fourth. — The National Cordage Company hereby agrees to 
lease the said properties with the right to purchase the same in the 
form specified in Schedule " D " attached, and does hereby under- 
take and agree to and with each and all of the parties hereto, to 
execute and perform the said lease and contract in accordance with 
the terms and provisions thereof, and to make each and every of the 
payments therein provided for. 



26 TEE NATIONAL CORDAGE COMPANY 

Fifth. — The Manhattan Trust Company agrees to accept the 
trusts hereby intended and contemplated, and to keep, observe 
and perform the same in accordance with the terms thereof. 

Sixth. — It is further provided that this agreement is intended 
to set forth the general provisions of the arrangement entered into 
by the parties, and the several parties hereby agree to execute 
such other proper instrument or instruments and in good faith to 
do and perform such other necessary acts and things as to carry 
out the agreement and general scheme hereby agreed on. 

In witness whereof, the party of the first part has hereunto 
set its hand and seal, and the parties of the second, third 
and fourth parts have caused these presents to be executed 
by their respective officers and their respective corporate 
seals to be hereunto affixed, the day and year first above 
written. 



Sealed and delivered in ) 



the presence of 



BOND OF SECURITY CORPORATION 

This Indenture, made the second day of November, one thousand 
eight hundred and ninety-one, between the Security Corporation 
a corporation organized and existing under the laws of the State 
of New Jersey, party of the first part, and the Manhattan Trust 
Company of the City of New York, a corporation organized and 
existing under the laws of the State of New York, party of the second 

part, WITNESSETH: 

Whereas, The said Security Corporation has full powers to acquire, 
mortgage, pledge, lease and otherwise dispose of factories, plants 
and mills, with their machinery and appurtenances, together with 
the lands upon which the same are located, situate in any of the 
States of the United States and elsewhere; and 

Whereas, Said Security Corporation has become the owner 
of and been vested with the title to the Cordage Mills plants, prop- 
erties, machinery and appurtenances hereinafter described, subject 
to certain liens by way of pledge, mortgage or otherwise as herein- 
after stated, all of which the said Security Corporation has this day 
leased to the National Cordage Company, with the right to become 
the absolute owner or direct the disposition thereof upon the payment 
of the rental and sinking fund payments, and on the terms in said 
lease contained; and 

Whereas, Said Security Corporation has prepared an issue of 
bonds to the amount of six million dollars, and proposes by this 
instrument, bearing even date with said lease, to secure the same, 
upon the trusts herein declared and set forth; and 

Whereas, The said corporation, party of the first part, has 
resolved, at a meeting of its Board of Directors convened and held 
on the day of 1 891, to create and issue, for 

the purposes aforesaid, its said mortgage bonds to the amount of 
six million dollars, of the denomination of $1,000 each, in general 
form and substance as follows: 



27 



28 THE NATIONAL CORDAGE COMPANY 

FIRST MORTGAGE CONSOLIDATED GOLD BOND 

United States of America 

state of new jersey 
Gold Bond $1,000. No 



The Security Corporation, a corporation duly created and existing 
under the laws of the State of New Jersey, for value received, 
acknowledges itself to be indebted unto the Manhattan Trust Com- 
pany, Trustee, or the bearer hereof, in the sum of one thousand 
dollars in gold coin of the United States of America, of the present 
standard of weight and fineness, which sum the said The Security 
Corporation promises to pay to the bearer hereof on the first day 
of November in the year 191 1, at the office of the Manhattan Trust 
Company in the City of New York, with interest thereon from the 
first day of November, 1891, at the rate of six per cent, per annum, 
payable semi-annually in the like gold coin, at the office of the said 
Trust Company, in the City of New York, on the first days of May 
and November in each and every year, on the presentation and 
surrender of the annexed coupons as they severally mature, and 
without deduction from either principal or interest of the amount of 
any tax or taxes which the said Company may be required to pay 
or to retain therefrom, by any present or future laws of the United 
States, or any of the States thereof, the said corporation hereby 
agreeing to assume the payment of all such taxes. 

In case of default in the payment of any coupon attached hereto 
at maturity, after demand of payment at the place named for pay- 
ment, and if such default shall continue for ninety days, then the 
principal of this bond shall become due and payable in the manner 
and upon the conditions provided in the deed of trust or mortgage 
hereinafter mentioned, securing the payment hereof. 

This bond is one of six thousand bonds of like amount, tenor and 
date, amounting in the aggregate to six million dollars, numbered 
from one to six thousand inclusive, the payment of all of which 
is equally secured by a certain deed of trust or mortgage of the 
properties, rentals and franchises therein described, dated November 
1, 1 89 1, executed and delivered by the said The Security Corporation 
to the Manhattan Trust Company, as Trustee, to which deed of 
trust or mortgage reference is hereby had for the terms and conditions 
of the same, and the terms and conditions upon which this bond is 
issued. 



BOND OF SECURITY CORPORATION 29 

The said bonds and each of them are entitled to the benefits of 
and subject to the sinking fund provisions contained in the said 
mortgage or deed of trust, whereby the sum of one hundred and 
twelve thousand five hundred dollars in like gold coin is to be paid 
to the Trustee in semi-annual instalments, sufficient at the maturity 
of said bonds to pay off and discharge the same in full. 

The payment of interest and the payments to the sinking fund 
in the said mortgage or deed of trust provided for, are further secured 
by a certain indenture of lease bearing even date herewith, executed 
by the said The Security Corporation to the National Cordage Com- 
pany, wherein the said National Cordage Company agrees to pay 
the Trustee, as a rental for the properties mortgaged hereby, in 
each year a sum equal to the interest upon this bond and the other 
bonds of said issue, and the semi-annual payments in said mortgage 
or deed of trust required to be paid to the sinking fund. 

This bond shall not become obligatory until authenticated by a 
certificate endorsed hereon and duly signed by the Trustee. 

In witness whereof, the said Corporation has caused its corporate 
seal to be affixed and the same to be attested by the signature of its 
President and Secretary, on the first day of November, 1891. 

President. 
Secretary. 

[form of coupon.] 

On the first day of The Security 

Corporation will pay the bearer hereof thirty dollars in gold coin, 
at the office of the Manhattan Trust Company, in the City of New 
York, being for six months' interest on its mortgage bond No. 

Secretary. 
[form of trustee's certificate.] 

The within bond is one of the bonds mentioned and described 
in a certain deed of trust or mortgage made by The Security Corpora- 
tion to the Manhattan Trust Company, as Trustee, bearing date 
the first day of November, 1891. 

Manhattan Trust Company, Trustee, 
By 

President. 



EXTRACTS FROM PERIODICALS COVERING DIFFERENT 

PHASES OF THE NATIONAL CORDAGE 

COMPANY'S HISTORY 

The Period of Extension 

The Secretary of the company has made the following statement: 
" Anyone familiar with the conditions of the issue of our preferred 
stock knows that we cannot place any obligations ahead of our stock. 
In buying outside properties, rather than pay all cash, which might 
interfere with the payment of the regular dividends on its stock, 
the company has preferred to pay part cash and make deferred pay- 
ments on the balance, the sellers keeping a mortgage on their prop- 
erties to secure these deferred payments, which bear a lower rate 
of interest than the stock. Thus the National Cordage Co. is enabled 
to secure these properties without any further issue of preferred or 
common stock, and still keep up permanently its regular dividends, 
besides greatly improving the value of its assets. In addition to the 
properties already known to have been acquired by the company, 
viz., the eleven mills in Canada (constituting all there are), the 
Sewall and Day Cordage Co. of Boston, the Boston Cordage Co. 
of Boston, the Standard Cordage Co. of Boston, the Day Cordage Co. 
of Cambridge, it has still more recently acquired the largest concern 
in the West, viz., Wm. Deering and Co.'s Twine Mills, Chicago; also 
the Field Cordage Co. of Xenia, Ohio; the Miamisburg Binder 
Twine and Cordage Co., Miamisburg, Ohio; the Middletown Twine 
and Cordage Co., Middletown, Ohio; the Galveston Rope and Twine 
Co., Galveston, Tex. And the few remaining are in process of pur- 
chase, which will undoubtedly soon be accomplished. A proposition 
is being seriously considered by which a finance company will assume 
these deferred purchase payments for new property on long time at 
low interest. The National Cordage Co. is thus nearing the goal 
that it originally set out to reach, namely, the acquisition of all the 
mills in the country, and by their acquisition greatly increasing its 
business, and at the same time giving it more facility for economical 
manufacture and distribution of its product, and further enabling 
it to procure its raw material to the best advantage." — 53 Chron. 325, 

September 5, i8gi. 

30 



EXTRACTS FROM PERIODICALS 3 I 

The Good Contracts 

The National Cordage Company, popularly known as the Cordage 
Trust, has been paying John Good, the millionnaire inventor and 
twine manufacturer, $200,000 a year to keep his mills shut down, 
and it has held an option, said to be for $7,000,000, on his plant, 
which includes a new twine machine that is expected to revolutionize 
the trade. The trust announced send-officially some time ago that 
this option had been taken up, but it leaked out yesterday that Mr. 
Good had notified the trust that he did not consider his contracts 
binding and that he would again open his mills and keep them open. 

Wall street was startled by the report and many inquiries were made 
at the offices of the Cordage Company, but the story of any break 
in its relations with Mr. Good was denied there, and no information 
on the matter could be obtained. The early afternoon rumor had it 
that Mr. Good had broken with the trust because of his dissatisfac- 
tion at its refusal to take up the option. It was said that it was only 
on the condition that the option would be taken up that Mr. Good 
consented to close his mills and draw $200,000 a year for doing nothing. 
But the trust people, for some reason, possibly the lack of $7,000,000, 
did not take up the option, but had the time extended more than 
once. 

When I called to see Mr. Good, who is addressed as " Count " 
by his friends, for he was made a Count of the Holy Roman Empire 
by the Pope in 1887, he smilingly acknowledged that he had severed 
his relations with the Cordage Trust. 

" But," said he, " I was not forced to. I did it myself for my 
own best interests. I have never been a member of the National 
Cordage Company. But I had a contract with them to shut my mills 
down, and an agreement that they should have the right to purchase 
my plants and patents within three years. The contract and agree- 
ment are dated November 2, 1891. Under the contract they paid 
me $200,000 per annum to keep my mills shut down, and under the 
agreement they were to pay me, if they availed themselves of the 
option several millions for my plants and patents. My relations 
with the men comprising the National Cordage Company, always 
of the most pleasant character, extend a good deal further back, how- 
ever, than 1891. In June, 1885, the United States Cordage Manu- 
facturers' Association, which was the precursor of the National 
Cordage Company, after inspecting the new process and system of 



32 THE NATIONAL CORDAGE COMPANY 

making rope and twine which I had perfected, made an agreement 
by which they paid me $150,000 a year for several years to shut down 
my cordage mill. At the expiration of that agreement I started up 
my mills and that resulted in the execution of a second agreement, 
under which the National Cordage Company bound itself to take 
the entire output of my mills. This second agreement, under which 
I made money, lasted until a short time before the execution of the 
agreement just terminated. — The New York World, April 27, 18Q2. 

Whatever agreements may have existed between this company 
and Mr. John Good, including the option to purchase his works and 
patents, have apparently been terminated. Mr. Good is reported 
as saying that there was a contract of Nov. 2, 1 891, by which he was 
paid $200,000 per year to keep his mills shut down and gave an option 
to purchase his plants and patents for several millions of dollars. 
The officers of the Cordage Company have made no statement. — 
54 Chron. 752, April 30, 1892. 

The Stock Dividend 

This company has made application to the Stock Exchange to list 
$10,000,000 of its common stock. This stock will be issued to the 
present common stockholders as a scrip dividend of 100 per cent, 
to represent about $11,000,000 of assets acquired by the company 
since its formation, and which it is the policy of the company to hold 
intact by issuing this stock to represent them. According to an 
official statement the company will at the end of the first fiscal quarter 
after the distribution of the new stock declare a dividend at the rate 
of 7 per cent per annum upon the increased common stock, and at 
the same time increase the dividend upon the preferred stock from 
8 per cent to 10 per cent. — 56 Chron. 127, January 21, 1893. 

The National Cordage Company announces that it has increased 
its common stock $10,000,000, making $20,000,000. The preferred 
is $5,000,000. The increase is to represent additions to and improve- 
ments in the properties of the company, in the way of mills, machinery 
plants, leaseholds, and other real and personal property. The com- 
pany has prepared certificates for 200,000 shares of the new common 
stock, representing at the par value of $100 per share $20,000,000, by 
the terms of which the common stock, after the payment of 8 per cent 
preferential cumulative dividend upon the preferred stock, will be 



EXTRACTS FROM PERIODICALS 33 

entitled to receive non-cumulative dividends up to 6 per cent per 
annum, and in case of other and further dividends, after the reserva- 
tion of such surplus as the directors may determine, the two classes 
of stock will share the same in the ratio of one-third to the preferred 
and two-thirds to the common stock, thus preserving to both common 
and preferred stockholders the same amount and proportion of 
dividends to which they are at present entitled. 

The present form of certificates of preferred and common stock 
will be modified to meet these changes. In all other respects the 
certificates of stock, both common and preferred, will be the same 
as those now listed. The entire 200,000 shares of new common stock 
will be lodged with the Farmers' Loan and Trust Company of New 
York for exchange at the rate of two shares of the new stock, with 
dividends reduced to 6 per cent, for one share of the common stock 
at present listed, and present common stockholders to the extent of 
over 75 per cent of the entire amount outstanding have already 
agreed to make the exchange offered, when the new stock shall have 
been admitted to the stock list of the New York Stock Exchange. 

Since every dollar of the new $10,000,000 capital is now probably 
represented by outstanding securities, stock and bonds, the new issue 
of stock partakes of the nature of liquid capital, commonly called 
water, all of which water the investing public is expected to acquire 
from the speculative pool and other shareholders under the delusion 
that present ability to pay dividends upon the enlarged capital con- 
stitutes it a substantial investment. How the investing public 
enjoys being deluded ! — The Boston Herald, January 28, i8g j. 



NATIONAL CORDAGE COMPANY 

Annual Report for the Year ending October 31, 1891 

To the stockholders of the National Cordage Company: — 

I take pleasure in submitting herewith the reports of the Financial 
and Manufacturing Directors for the fiscal year of the Company 
ending October 31st, 1891 : — 

Report of the Financial Director 

To the Directors of the National Cordage Company: — 

I herewith submit the report of the Comptroller for the fiscal year 
ending October 31st, 1891, as follows: — 

Comptroller's Report 

Assets 
Quick Assets: — 

Merchandise $3,143,793.06 

Accounts and bills receivable 2,657,576.04 

Cash 540,251.04 $6,341,620.14 

Real estate, buildings, machinery and leaseholds . . 17,077,500.00 

$23,419,120.14 
Liabilities 

Accounts and bills payable $4,712,806.69 

Preferred stock 5,000,000.00 

Common stock 10,000,000.00 

$19,712,806.69 
Surplus 3,706,313.45 

$23,419,120.14 
Profit and Loss Account for the Year 

Profit on operations for the year $1,406,313.45 

Dividends paid 1,300,000.00 

Balance $106,313.45 

Benjamin Seaward, Comptroller. 
34 



REPORT TO STOCKHOLDERS 35 

It will be thus be seen that, notwithstanding the severe competition 
during the year and a declining hemp market, which still further 
reduced profits, the results of the business have been fairly satisfac- 
tory. 

I should like to call attention to the fact that, up to this time, 
the officers of the company who are Directors have never received 
any salary for their services. Being large stockholders and vitally 
interested in seeing that the company was placed on a sound and 
substantial basis, they have voluntarily given their entire time to its 
service. This work has now been satisfactorily accomplished and 
the business greatly increased and improved by the acquisition of 
new properties. I therefore think it proper to recommend that, 
for the current fiscal year, the officers of the company should be paid 
salaries commensurate with the importance of their duties. 

Owing to the present low prices of raw materials and the great 
economies introduced in the manufacture and distribution of our 
goods, the present year should be a very profitable one, and while 
placing no additional burdens upon the consumer should afford the 
Company much larger returns than previous years. 

It is very difficult at this time to give an accurate estimate of the 
profits of the business for the quarter ending January 31st. I feel 
safe in stating, however, that, after deducing expenses, rentals and all 
fixed charges, these profits will be found sufficient to pay the entire 
annual dividend of $400,000 on the preferred stock and a quarterly 
dividend of $250,000 on the common stock, besides leaving a large 
surplus. 

E. M. Fulton, Financial Director. 



Report of the Manufacturing Director 

To the Directors of the National Cordage Company : — 

I beg to submit to the Board of Directors a report of the physical 
condition of the properties under its control. 

Much care has been devoted to improving the different mills, and 
to placing all as far as possible upon a plane of equal efficiency. Re- 
sults have been most flattering in this respect. A large decrease 
in the cost of production has resulted and constant comparisons of 
the workings of the different mills have enabled us to adopt the best 
methods of manufacture to ensure the highest results. This would 



36 THE NATIONAL CORDAGE COMPANY 

have been impossible of accomplishment had the various properties 
now owned by the company still remained in the control of the sepa- 
rate organizations which heretofore managed them. We have now 
reached the position of being able to manufacture at a much lower 
cost than ever before. I have been unable to find that any inde- 
pendent mill, previous to our acquisition of that property, was able 
to manufacture at anything like the low cost of production we have 
succeeded in securing for the combined properties under your control. 

Betterments to the mill properties have placed them in the highest 
possible physical condition. The buildings are generally in first- 
rate order, and all machinery — whether in use or idle — has been 
fully repaired and made capable of running without interruption, 
thus bringing all the plants up to a state of the highest efficiency. 

I have the fullest confidence that the current year will show large 
additional reductions in operating expenses, and whatever has been 
accomplished in the short period while the new mills have been in 
operation under our control, will be improved upon when continuous 
and uninterrupted running shows their results. 

G. Weaver Loper, Manufacturing Director. 



The Board of Directors fully concur in the views taken of the 
present condition and future prospects of the corporation by the 
foregoing reports. 

Many of the properties now owned or controlled by the Company, 
including all the mills in Canada, and several of the largest mills in 
Boston and in the West and Southwest, came under its control about 
the i st of November, 1891. Consequently the profits shown by the 
Financial Director's report merely represent the profits of the mills 
formerly owned by the Company, whereas now its manufacturing 
capacity has been very largely increased and its earnings should be 
increased correspondingly. 

By the acquisition of more properties, three great material advan- 
tages were secured for your Corporation. 

First. — A large and more economical distributing power. 
Second. — Lower raw material consequent upon the absence 

of speculation and competition in the fiber markets by the various 

concerns, corporate and individual, which have been absorbed 

by your Company. 



REPORT TO STOCKHOLDERS 37 

Third. — Cheaper cost of production : (a) By comparisons and 
the introduction in all the mills of the best methods found in each. 
(b) By spreading the fixed charges over a larger output, (c) By 
concentrating the purchase of the manufacturing supplies for all 
the mills; thereby securing them at the lowest possible prices. 
(d) By manufacturing for ourselves the principal supplies used 
by the Company. 

Through these advantages, secured by the control of many mills, 
and their management under one direction, the Company hopes to 
be enabled to secure an increased margin of profit without increasing 
the prices of its product to the consumer. 

The properties now owned and controlled by the Company are 
situated in many States in this country and the provinces of Canada, 
and are forty-nine in number. Some of the plants are very extensive, 
as may be judged from the fact that the walks in which the large sizes 
of ropes and cables are made are nearly one-third of a mile in length, 
and our largest plants occupy acres upon acres of land which are 
constantly increasing in value. 

The geographical situation of the mills has rendered advisable 
a division into four general departments of the properties of the 
Company, viz., The New England Department, the Eastern Depart- 
ment, the Western Department, the Canadian Department, each 
division being in general charge of a department manager, who acts 
under directions from the main office of the Company. The head- 
quarters of the various department managers are at New York, 
Boston, Cincinnati and Montreal, and the Company has branch offices 
at these places. 

The other departments of the business, such as the purchasing of 
the raw materials, the sale of the product, the insurance department 
and the accounting department, are administered from New York, 
while the Bureau of Transportation is located at Cincinnati, which 
was found to be the best point for that purpose. 



The many inquiries which have been made about the organization 
of the Company and its issue of stock seem to require an authoritative 
statement regarding these matters. 

The Capital Stock of the corporation is $15,000,000, divided into 
50,000 shares of 8 per cent Cumulative Preferred Stock of $100 each, 



38 THE NATIONAL CORDAGE COMPANY 

and 100,000 shares of Common Stock of $100 each; all of which has 
been issued as full-paid stock. 

The Company has no bonded or mortgage debt, and the creation 
of any such debt, except with the consent of holders of record of at 
least 80 per cent of the Preferred Stock, is prohibited. 

The Preferred Stock is entitled to a preferential cumulative dividend 
of 8 per cent per annum, payable out of the net earnings of the Com- 
pany before any dividends are paid upon the Common Stock; and 
the Preferred Stock also has priority over the Common Stock in 
respect of all property and assets in case of liquidation or dissolution. 

After the payment of 8 per cent cumulative on the Preferred Stock 
and 1 2 per cent on the Common Stock, any further dividends have to 
be divided pro rata between the two classes of stock. 

The two classes of stock have the same voting power per share. 

The dividends on both classes of stock are payable quarterly on the 
first days of November, February, May and August in each year. 

Both classes of stock are registered at the office of the Farmers' 
Loan and Trust Company, and are listed on the regular list of the 
New York Stock Exchange, having passed the scrutiny of the Govern- 
ing Committee of the Exchange. 

The organization of the Company and the legal validity of its stock 
issue were in October, 1890, submitted by the Bankers who offered 
for sale the Preferred Stock of the Company to their counsel, and 
approved, as will appear from the following opinions : 



New York, October 9th, 1890. 

To Messrs. August Belmont and Co. : 

We have, as requested by you, examined the organization of the 
National Cordage Company, and its issue of preferred stock. It is 
our opinion that the organization is regular and the stock issue valid; 
and that the holders of said stock will be legally secure in the rights 
and immunities set forth in your prospectus of this date. 

Signed, Lowrey, Stone and Auerbach. 



REPORT TO STOCKHOLDERS 39 

New York, October 9th, 1890. 
Messrs. Vermilye and Co.: 

Gentlemen : We have investigated the organization of the National 
Cordage Company, and the proceedings attending its issue of pre- 
ferred stock. 

We advise you that the organization of the company and the issue 
of preferred stock are valid in law, and that the holders of such stock 
will be entitled to the privileges and immunities stated in the pro- 
spectus. 

Very truly, 

(Signed) Butler, Stillman and Hubbard. 

It will be thus seen that the National Cordage Company is not a trust, 
but a regular corporation, with the protection afforded by the laws 
of the State of New Jersey; and further its capital stock cannot be 
increased without the consent of the stockholders, as required by law. 
The stock of the corporation is widely, distributed, the total number 
of stockholders being at the last closing of the books nearly one 
thousand, a considerable amount of stock being held by investors in 
Europe and Canada. 

James M. Waterbury, President. 

— 54 Chron. 247 



THE BILL OF COMPLAINT UPON WHICH WAS BASED 
THE APPOINTMENT OF RECEIVERS 

IN CHANCERY OF NEW JERSEY 

To His Honor Alexander T. McGill, 

Chancellor of the State of New Jersey 
Humbly complaining, shows unto your Honor, your orator, James 
M. Waterbury, of Westchester, New York, That: — 

I. The National Cordage Company is a Corporation of the State 
of New Jersey, organized under an act of the Legislature, entitled 
" An Act Concerning Corporations," approved April 7th, 1875, and 
the several supplements thereto, by a Certificate of Organization, 
bearing date the 18th day of July, 1887, and recorded on the 20th day 
of July, 1887, in the office of the Clerk of the County of Hudson, and 
afterwards on the same day filed with the Secretary of State at Trenton. 

II. The principal office of the said Corporation in this State, as 
stated and set forth in the said certificate of Organization, is in Union 
Township, in the County of Hudson, and the said Corporation has 
also an office in the City of New York, and offices elsewhere through- 
out the United States. The authorized Capital Stock of said Corpora- 
tion, as fixed by the said certificate, is two million, five hundred thous- 
and ($2,500,000) dollars, divided into twenty-five thousand (25,000) 
shares of the par value of one hundred ($100) dollars each. 

III. The objects for which said Corporation was formed are to 
manufacture and sell cordage and binder twine, and any and all 
other similar commodities, and for other purposes as will more fully 
appear by reference to the said Certificate of Organization, a true 
copy whereof is annexed to this bill, and marked " Schedule A," and 
hereby made a part of this bill of complaint. 

IV. The said Corporation was organized on or about the 20th 
day of July, 1887. 

V. The capital stock of said Corporation was afterwards, at dif- 
ferent times, increased, the last increase of capital being made on the 
10th day of December, 1892, when the said stock was increased to 
the sum twenty-five million ($25,000,000) dollars, of which five million 
($5,000,000) dollars was preferred stock, and twenty million ($20,000,- 

000) dollars was common stock, all of which is now outstanding. 

40 



BILL OF COMPLAINT 4 1 

VI. Soon after the organization of the said Corporation, it enters 
upon the manufacture and sale of Cordage and other business pro- 
vided for in the Certificate of Organization, and has since continued 
to prosecute said business in the States of New Jersey, New York, 
Massachusetts, Ohio, Pennsylvania, and Illinois, in all of which 
States it is now operating cordage and binder twine mills, with the 
exception of the State of New Jersey, its mill in that State having 
been destroyed by fire, and the said Corporation has real or personal 
property in all of the States above mentioned. 

VII. Your orator, James M. Waterbury, is President of said Cor- 
poration, and a stockholder thereof, holding upwards of one thousand 
(1,000) shares. 

VIII. On the 4th day of May, 1893, a debt of fifty thousand ($50,- 
000) dollars, due on demand to the National Park Bank of the City 
of New York, was demanded and called of the said The National 
Cordage Co., and was dishonored and default made in payment 
thereof, because said Corporation had not sufficient funds to pay 
the same. 

At ten o'clock on the morning of the 5th of May, 1893, there will 
become due and be demanded of the said Corporation, debts aggregat- 
ing about one hundred and thirty-five thousand ($135,000) dollars, 
which said Corporation is not able, for lack of funds, to pay. 

On the 6th day of May, 1893, debts will mature, amounting to 
about three hundred and seventy-six thousand ($376,000) dollars, 
and on the 8th day of May debts will mature to the amount of about 
forty-one thousand ($41,000) dollars, and daily thereafter until 
the 31st day of May, 1893 debts will mature, which, together with 
those above stated, will in all amount to more than ten hundred 
thousand ($1,000,000) dollars. 

IX. The said Corporation will make default upon in payment of 
the said maturing debts, upon the above mentioned dates for lack 
of funds to pay the same and without the expectation of receiving 
from any source, funds to pay the same. 

X. In addition to the above mentioned indebtedness, said corpora- 
tion has commercial paper and other indebtedness outstanding, 
exceeding two million ($2,000,000) dollars, which indebtedness 
matures during the months of June, July, August, September, and 
October. 

XL The assets of said Corporation consist of cordage mills owned 
by or leased to the said Corporation in the several States above 



42 THE NATIONAL CORDAGE COMPANY 

mentioned, together with raw stock and manufactured stock of cord- 
age and binder twine on hand, and in process of manufacture, the value 
of which it is impossible for your orator to accurately state, or even 
to approximately estimate at this time. The said Corporation also 
has assets consisting of books accounts and bills receivable, to a con- 
siderable amount, which mature at divers dates from May to Novem- 
ber, 1893, the greater part of the same maturing not earlier than the 
month of September, 1893. The said Corporation also owns certain 
stocks of Corporations, owning and operating some of said cordage 
mills. The assets of the said Corporation are not available at this 
time for the payment of the indebtedness of the Corporation, or for 
the raising of money to pay such indebtedness, and the Corporation 
is therefore utterly unable to meet its obligations, as they mature 
from this time, and has no prospect of being able to meet the same, 
or to resume its business within a short time hereafter, and the Cor- 
poration is, in fact, insolvent. 

XII. The greater part of the assets of said Corporation are outside 
of the State of New Jersey, and are likely to be attached by creditors 
in the State of New York and elsewhere, on the ground that the 
Corporation is a foreign corporation. An attachment has already 
been threatened in the City of New York, for a matured debt, and 
your orator verily believes that unless a receiver is speedily appointed 
for the equal protection of the creditors, other attachments will be 
issued in different States to the great embarrassment of the opera- 
tions of the Company and wasting of its assets, and that preferences 
will be obtained by certain creditors, which ought not, in equity, 
to be obtained. 

In tender consideration whereof, and to the end that The 
National Cordage Co., who are the defendants in this suit, may answer 
all and singular the premises fully and particularly as if the same were 
herein again repeated and they particularly interrogated, and that 
the said Corporation may be declared insolvent by the order of this 
Court, and that a receiver or receivers may be appointed, with full 
power and authority to demand, sue for, collect, receive and take 
unto their possession, all the goods, chattels, rights and credits, monies 
and effects, lands and tenements, books, papers, choses in action, 
bills, notes and property of every description belonging to the said 
Corporation at the time of their insolvency or suspension of business, 
and to sell, convey or assign all the said real or personal assets, and 
to pay unto a Court of Chancery, all the monies and securities for 



BILL OF COMPLAINT 43 

money, arising from such sales, or which the said receiver or receivers 
shall collect or receive by virtue of the authority vested in them, to 
be disposed of by the said receiver or receivers, under the order of 
said Court, among the creditors of the said Corporation, according 
to law, and that the said Corporation and its officers and agents 
may be restrained from exercising any privileges or franchises granted 
by its Certificate of Organization, and from collecting or receiving 
any debts, or paying out, selling, assigning or transferring any of the 
assets, monies, lands, tenements or effects of the said Corporation, 
until the Court shall otherwise order, and that your orator shall have 
such further or other relief as the circumstances of the case may re- 
quire and as may be agreeable to equity. 

May it please your Honor, the premises considered, to grant unto 
your orator, not only the State's most gracious writ of injunction 
to be directed to the said The National Cordage Company, its officers 
and agents, restraining them in manner and form aforesaid, but 
also the State's writ of subpoena, issuing out of and under the seal of 
this honorable Court, directed to the said The National Cordage Com- 
pany, therein and thereby commanding them to be and appear before 
your Honor, in this honorable Court, upon a day and under a penalty 
therein to be expressed, to answer all and singular the premises, and 
to stand to, abide and perform such decree as your Honor shall make 
herein, and your orator will ever pray, etc. 

Collins and Corbin 
Solicitors for and of Counsel with Complt. 
State of New York 
City and County of New York 



r ss: 



George Weaver Loper, of full age, being duly sworn of oath, says 
that he resides in the City of New York, and is the Treasurer of the 
National Cordage Company, New Jersey Corporation, defendant 
in the foregoing bill of complaint, that he has heard the foregoing 
bill of complaint read and is familiar with facts therein stated. That 
all said facts with reference to the formation of said corporation, its 
purposes, the amount of its stock and its business and property are 
true of his own knowledge. That a debt of $50,000 due on Call by 
said corporation to the National Park Bank of the City of New York 
was demanded on call and became due and payable on May 4th, 1893, 
and payment thereof was refused and default made therein, because 
of the lack of sufficient funds of said corporation to pay the same. 
Further debts of said corporation will mature on May 5th, 1893, 



44 THE NATIONAL CORDAGE COMPANY 

amounting to not less than $135,000, and default will be made in the 
payment thereof, because of lack of funds to pay the same. On 
May 6th, 1893, further debts of said corporation will mature amount- 
ing to not less than $376,000, and default will likewise be made in the 
payment thereof for lack of funds. Daily thereafter during the month 
of May, debts will mature. 

The total amount of which said indebtedness maturing from May 
4th to May 31st is more than one million ($1,000,000) dollars. The 
corporation is also indebted in amounts which will mature from day 
to day during the months of June, July, August and September in 
1893, exceeding $2,000,000. 

The corporation is without funds to meet the said indebtedness 
or any considerable part thereof, and has no assets which are readily 
convertible into money and has no reasonable prospect of being 
able to meet its obligations after this date. The assets of said cor- 
poration consist of several cordage mills, owned or operated at least 
in the several States mentioned in the bill of complaint and all the 
cordage and twine manufactured and in manufacture, and in process 
of manufacture, the value of all which it is impossible at this time 
to estimate or to even approximate. 

That the corporation also has certain assets, consisting of open 
accounts receivable and bills receivable, the greater part of which 
mature in September, October and November, 1893, and a very small 
part of which is available for the raising of money at this time. The 
securities of said company which are available for the raising of said 
money are already pledged and hypothecated for debts due by the 
corporation. The corporation cannot pay its maturing obligations 
and has no means of raising money to pay the same and is in fact 
unable to pay its debts and is insolvent. 

Subscribed and sworn to at New York City 
May 4th, 1 893 , before me the subscriber 
a Notary Public in and for the County 
of Kings in the State of New York, 
certificate filed and I duly authorized 
to act in the City and County of New 
York as witness my hand and seal of 
office. 

Chas. E. Borden, 
(l.s.) Notary Public, Kings Co., Certif. Filed N.Y. Co. 



" G. Weaver Loper. 



BILL OF COMPLAINT 45 

City of New York ) 

State and County of New York ) 

James M. Waterbury, being duly sworn on his oath says, 

That he resides at Westchester in the State of New York, and is 
the President of The National Cordage Company, a Corporation 
of New Jersey: that the principal business offices of the Company 
are in the City of New York. 

Deponent has heard the foregoing bill read, and the facts and matter 
as therein stated with reference to The National Cordage Company 
are true of deponent's knowledge. He has also heard read the fore- 
going affidavit of George Weaver Loper, Treasurer, and says that 
the statements therein contained are true. 

Deponent further says that said Corporation and its officers have 
endeavored to raise money to meet all maturing obligations of the 
Corporation and find it utterly impossible to do so, and the Corpora- 
tion has no money or available assets or means of raising money where- 
with to meet such obligations. 

Deponent further says that at a meeting of the Board of Directors 
held this day in the City of New York, it was unanimously resolved 
that the deponent should have prepared and presented to the Chan- 
cellor bill of complaint, praying an injunction and receiver because 
of the insolvency of said Corporation, and with a view of preserving 
the assets of the Company for the equal benefit of all its creditors. 

James M. Waterbury. 

Subscribed and sworn to at New York City this May Fourth, Eighteen 
Hundred and Ninety Three before me, a Notary Public of the State 
of New York. Witness my hand and official seal. 

Chas. E. Borden, 
(l.s.) Notary Public, Kings Co., Certif. Filed N.Y. Co. 



AN ACCOUNT OF THE FAILURE OF THE NATIONAL 

CORDAGE COMPANY AS GIVEN IN A 

NEWSPAPER AT THE TIME 

Upon the application of President James M. Waterbury of the 
National Cordage Company, Chancellor McGill of New Jersey last 
night appointed two receivers for the trust. The appointments 
were made at 10.30 at the Chancellor's house in Jersey City. The 
receivers are E. F. C. Young, President of the First National Bank 
of Jersey City, and G. Weaver Loper, Treasurer of the trust. It 
was a friendly proceeding based on a defaulted note for $50,000 lying 
at the National Park Bank, and the company's officials represented 
that it is solvent, but short of money. Receivers will be appointed 
in four other States. 

This application, the full details of which will be found elsewhere, 
closed the proceedings of the most exciting day Wall street has seen 
since the Baring panic. 

The street is taking its share of the object lesson which, according 
to all accounts, it is the desire of the Administration that the whole 
country should receive as to the evil effects of the Sherman Silver law 
in order to secure its repeal. It is hardly necessary to add that 
Wall street needs no education upon this issue. In speaking of 
Secretary Carlisle's manifesto intimating his intention to suspend 
gold payments on Treasury notes when the gold balance of the Treas- 
ury should fall below $100,000,000, a prominent banker said a few 
days after its publication that the most conspicuous effect of Mr. 
Carlisle's first important official utterance was a suspension of dis- 
counts throughout the United States. To be sure, the business com- 
munity has recovered a little from the tremendous shock that Secretary 
Carlisle gave it, but it will be a long time before the damage inflicted 
can be repaired. 

The preceding statements are essential to a correct understanding 
of yesterday's exciting events in and about the Stock Exchange. 
There is excellent authority for the statement that when the banks 
all over the country were constrained by Secretary Carlisle's vague, 
yet alarming manifesto to curtail their accommodations to the business 
community, that the ability of the National Cordage Company to 

46 



NEWSPAPER ACCOUNT OF FAILURE 47 

place its bills receivable and other commercial paper was cut down 
to the extent of $2,000,000. 

This company, owing to what has proved to be a most unfortunate 
omission, was not provided when it was organized with an amount 
of working capital adequate for the conduct of its business. As set 
forth in an official statement of the company, published last Sunday, 
the cordage business requires an immense amount of capital during 
nine months of the year, which comes back to it during the summer 
months. This capital is used for the purchase of raw material and 
the manufacture of binder twine, which is marketed only during 
the harvest season. 

The Treasurer of the company is authority for the statement that 
about $7,000,000 is required to conduct this branch of its business. 
Before the industry was concentrated as at present each concern 
borrowed money for this purpose on its own responsibility. Now 
the financing of very nearly the entire industry devolves upon a 
single corporation, the National Cordage Company, and in conse- 
quence the same names appear upon a vast amount of paper. 

As soon as the Cordage Company felt the contraction of credit 
which Secretary Carlisle had precipitated, its managers, somewhat 
.tardily, it must be confessed, formulated a plan for providing per- 
manent working capital. It was laid before the public last Sunday, 
together with the reasons that made the proposition necessary. 
Wall street did not take kindly to it, for in the first place it disclosed 
a fact that many people were ignorant of, namely, that the Cordage 
Company is a large borrower of money; in the next place it was argued 
that the proposition would not have been broached at this time, 
when the market for securities is narrow and weak, had not necessity 
compelled such a course. 

The fact that the $2,500,000 of preferred stock which was to be 
offered to the stockholders had been underwritten counted for very 
little in the estimation of the street. Neither did the argument 
that the additional issue of stock would not increase fixed charges 
of the company, but simply result in the interest on that amount 
being paid to stockholders instead of to money lenders. The cir- 
cumstances that the street attached importance to were that the 
company was widely extended and was in urgent need of more money. 
Hence the continuous selling of National Cordage since Monday 
morning, which has carried the price down from 57 to 20 at the close 
yesterday, a net decline of 37 points. 



48 THE NATIONAL CORDAGE COMPANY 

This movement has thwarted the intentions of the managers of the 
company. They had hoped by supporting the prices of the common 
and preferred stocks of the company to induce the shareholders to 
take the new preferred stock and thus provide the company with 
needed funds. At the same time there is reason for believing that the 
efforts of President James M. Waterbury and his associates to make 
a market for the new issue of stock have seriously impaired their 
ability to take that stock themselves. Again, the new issue of stock 
was underwritten by a syndicate at par, and it is considered doubtful 
whether those members of the syndicate who are financially able 
to take the stock can be induced to take their respective interests, 
now that the preferred stock is selling 30 points below the price at 
which they underwrote it. 

Wall street did not see all of these things at a glance yesterday 
morning, but it did see the moment that business was resumed on the 
Stock Exchange that there was foundation somewhere for the ominous 
rumors of financial embarrassment that filled the street Wednesday 
afternoon. On the stock tape and on the official sales sheet the first 
transaction in Cordage was printed, 3,000 shares at 37 to 28. This 
means that the transactions at the start were at prices so wide apart 
that as many of them as could be reported in the intense excitement 
that prevailed were at various prices between the two figures given. 
The next sale reported was at 27, then 26^ and in a few moments 
the price rallied to 28^, but the rally did not hold. Stock came pouring 
in, and the pressure to sell regardless of price was so great that only 
one conclusion was possible, namely, that imperative liquidation 
on an enormous scale was taking place. 

A small portion of Wall street had learned overnight of at least 
one quarter from which an announcement of insolvency might be 
expected, but to the majority the announcement by the Chairman 
of the Stock Exchange a few minutes after 10 o'clock of the inability 
of Henry Allen and Co. to meet their engagements was a surprise. 
For some time past that firm has been doing an extraordinarily large 
business on the floor of the Exchange, and the general impression 
was that it had made a great deal of money. It was very active in 
the big break in Distilling and Cattle Feeding last winter, and was 
generally supposed to favor the short side of the market. It appears, 
however, that a short time ago the firm undertook large operations 
for President James M. Waterbury of the National Cordage Company 



NEWSPAPER ACCOUNT OF FAILURE 49 

and some of his associates, and the indications are that they were the 
principal brokers for the so-called Cordage pool. 

The first rap of Chairman Mitchell's gavel when he called the 
Exchange to order to announce the failure of Messrs. Allen and Com- 
pany caught the attention instantaneously of every broker on the 
floor. Every one was expecting a failure, and the moment the call 
to order began a certain feeling of relief that at last something definite 
was to be known, possessed the nervous, excited crowd. In less 
time than it takes to tell it all business was suspended, while several 
hundred brokers bunched themselves closely in front of the rostrum, 
in painful expectancy of the bad news that was to come. The letter 
of the unfortunate firm was brief and couched in the language usually 
employed in announcing such events. The moment the name was 
read there was a wild rush for telephones and to offices to communicate 
the news, for so great has been the strain upon the speculative com- 
munity the last few days that what was construed to be the beginning 
of the end was welcome. 

Less than a full minute elapsed between the suspension of business 
and its resumption, and the impetuous haste to sell stocks appeared 
to have been intensified by this trifling interruption. This was evi- 
dence enough to the experienced broker that the liquidation was not 
yet over. Hence, other confessions of insolvency were momentarily 
expected. They were not long delayed. The first was that of 
B. L. Smyth and Company, a firm that has been identified with the 
placing of the bonds of the Security Company, a corporation subor- 
dinate to the National Cordage Company; and soon after that Mr. 
Schuyler Walden, for many years active upon the floor of the Exchange 
announced his inability to meet his obligations. 

In the mean time the street learned that all the failures were due 
to the inability of some of the Cordage people to make good their 
accounts, and in consequence it was rumored that Mr. James M. 
Waterbury himself had made an assignment. This was officially 
denied, and financial statements were sent out by the news agencies 
that the National Cordage Company was in no way involved through 
the misfortunes of its managers. 

These, however, were of no avail in restoring confidence. With 
occasional rallies of a point or two Cordage common sank lower and 
lower, until shortly before the close 100 shares sold at i8f. The 
final sale was at a recovery of a point and a quarter to 20, at which 
price it showed a net decline for the day of 1 7 points. 



50 THE NATIONAL CORDAGE COMPANY 

The semi-panic in National Cordage affected the entire Industrial 
group. Sugar Refining was traded in to the extent of nearly 100,000 
shares, and after selling at 83 closed at 6| per cent lower than on 
Wednesday, at 84. General Electric was another conspicuously 
weak stock, selling down to 79^ and rallying only half a point at the 
close. It sustained a net loss of 8| per cent. American Cotton Oil 
was more extensively traded in for a long time and closed 3 per cent 
lower. There was not much doing in United States Rubber, yet 
enough to carry the price down nearly 4 per cent. Distilling and 
Cattle Feeding was affected least of all, for the reason that it had its 
decline a few months ago. 

The railroad stocks came in for their share of the liquidation, 
though in the Granger stocks, in which the trading was heaviest, 
many brokers were of the opinion that the selling was chiefly for 
account of prominent bear operators. The decline in these stocks, 
particularly St. Paul, attracted buying for European account. After 
the close of business foreign arbitrage houses estimated that they 
had purchased in the aggregate fully 25,000 shares of railroad stocks, 
not only for London, but for some of their correspondents on the 
Continent. 

London has been buying stocks now for three or four days, and 
has taken during that period possibly 60,000 shares. This buying 
was about the only encouraging development yesterday, for it indi- 
cates that the bargain hunters abroad are beginning to realize that 
some stocks are cheap, and are willing to put their money in them, 
even if investors here are reluctant to do so. Another good feature 
today was a weak and lower market for sterling exchange. That was 
due partly to the purchases of securities referred to, and also to a 
flurry in the money market, during which the rate for call loans ran 
up to 20 per cent. The bulk of the business, however, was done 
considerably below that figure. Stock brokers appeared to have no 
trouble in securing whatever accommodations they wanted, provided 
they could offer fairly good collateral. The activity in money was 
due chiefly to the shifting of loans, resulting from the unsettled feeling 
that prevailed. 

There were no rumors yesterday, as there were on Wednesday, 
reflecting on the insolvency of financial institutions, but the Street 
was strongly of the opinion late in the afternoon that the affairs of 
the National Cordage Company were in such a condition that its 
executive officers had lost their heads. However that may be, a 



NEWSPAPER ACCOUNT OF FAILURE 5 1 

number of bankers and officers of financial institutions were in con- 
ference during the day with the officers of the Cordage Company. 
Their object was to find out the exact condition of the company's 
finances and also its needs, with the view of rendering such assistance 
as might be necessary or expedient to finance the company. Late 
in the afternoon it was decided that the best course to pursue was to 
place the company in the hands of receivers. 

The difficulty in adjusting the financial affairs of the National 
Cordage Company results from the various complications between 
it and its subordinate organizations. This may be understood when 
it is explained that the Cordage Company buys all the raw material 
for the various concerns which it controls, and all of which still pre- 
serve their original identity. It also sells their product. Each 
concern, therefore, makes its own obligations for material received, 
and they are endorsed by the National Cordage Company or some 
of its officers. Again, the paper of the National Cordage Company 
has been endorsed by the various auxiliary concerns and by various 
directors. A banker familiar with the financing of the company said 
yesterday that the notes now outstanding are as various as to their 
makers and endorsers as the use of ten or a dozen different names 
will permit. The amount outstanding is understood to be $4,000,000 
or $5,000,000 and it is held largely in New England. A few of the 
banks of this city held a good deal of it, but they are large, strong 
institutions. 

In the circumstances a definite statement as to the relations between 
the National Cordage Company and the Security Company is impor- 
tant. After the National Cordage Company was formed its managers 
wished to secure the control of a large number of its competitors. 
To that end the Security Company was formed and bought up the 
concerns referred to by an issue of its bonds. Then it leased the con- 
cerns to the National Cordage Company, which guarantees the 
principal and interest of the bonds, which, though debentures, are 
practically a first mortgage upon all of the properties thus combined. 

The bonded debt of the Security Company was originally $6,000,- 
000, but it has been reduced somewhat by the operations of a sinking 
fund. Its capital is small, being $350,000, and a part of it is held by 
the Cordage Company. This operation was conducted through 
the Manhattan Trust Company, of which Mr. John I. Waterbury 
is President. He, however, is in no way related to the President 
of the National Cordage Company, nor has the Trust company any 



52 THE NATIONAL CORDAGE COMPANY 

interest in the affairs of the Cordage company or those connected 
with it, except as trustee of the Security company's bonds. 

After the Stock Exchange closed a much easier feeling developed, 
because a number of firms that were understood to be in difficulty 
had not failed; besides, it was fairly well understood among bankers 
that it would be necessary to place the Cordage Company in the 
hands of receivers to protect its creditors. 

A number of bank officers and others, who were cognizant of this, 
expressed the opinion that Wall street had seen its worst day for the 
present. Of course, the natural inquiry was as to whether any other 
concern would be found to be in the condition similar to that which 
has forced the Cordage Company into the hands of the courts. 

THE CORDAGE RECEIVERSHIP 

Loper Appointed at the Suggestion of Drexel, Morgan and Company 

A Sun reporter learned early yesterday evening that an application 
was about to be made to Chancellor McGill in Jersey City for the 
appointment of a receiver for the Cordage company. The reporter 
found the Chancellor at his home in Barrow street at 9 o'clock. 
Chancellor McGill said that no application had been made, but that 
he had received a request from Lawyers Collins and Corbin of Jersey 
City to remain at home last night, as they had some business of 
importance to submit to him. The reporter informed the Chancellor 
what the nature of the business would probably be, and when a party 
of lawyers called at the house about 9.30 to make the application, 
he surprised them with the information that he knew all about it. 

In the party were ex-Mayor Collins of the firm of Collins and Corbin, 
Lawyer R. V. Lindabury of Elizabeth, Lawyer John L. Cadwalader 
of this city, James M. Waterbury, President of the Trust, and George 
W. Loper, its Treasurer. 

Mr. Cadwalader and Mr. Collins made formal application for the 
appointment of two receivers, one in New Jersey and the other in this 
State, and suggested the names of Edward F. C. Young, President 
of the First National Bank in Jersey City, and George W. Loper. 

The Chancellor was a little surprised that the appointment of Mr. 
Loper should be asked for, but it was explained to him that Mr. Loper 
was thoroughly familiar with the business. A letter from Drexel, 
Morgan and Company was also submitted to him. That firm repre- 
sents the majority of the creditors, and they requested that if the 



NEWSPAPER ACCOUNT OF FAILURE 53 

Chancellor could find it consistent to do so he appoint Mr. Loper, 
on account of his familiarity with the company's affairs. 

The lawyers explained to the Chancellor why the receivers were 
asked for. The concern, they said, is solvent and its assets equal, 
if they do not exceed, the liabilities; but the assets cannot be realized 
upon in time to meet maturing obligations. A note for $50,000 held 
by the National Park Bank of this city fell due yesterday and could 
not be met. Another note for $135,000 falls due today, and there 
is no money to meet it. Notes aggregating $2,000,000 will mature 
before the end of this month. 

The officers of the company, after consultation with Drexel, Morgan 
and Company decided to put the concern in the hands of receivers, 
in order to avoid trouble. The proceedings are entirely friendly. 

The Chancellor appointed Messrs. Young and Loper, and fixed their 
bonds at $200,000 each. As it was necessary to have the bondsmen 
qualify at once the Chancellor appointed Lawyer Flavel McGill as 
Master in Chancery to prove the bonds. A messenger was sent 
to his house, and as he lives on the same block it took only a few 
minutes to get him to the Chancellor's. At about a quarter before 
1 1 o'clock Chancellor McGill affixed his signature to the paper appoint- 
ing Messrs. Young and Loper receivers of the big Trust. The party 
then hastened to the Hotel Washington, where Mr. Young was 
waiting with his bondsmen, Freeman A. Smith and John Mullins. 

The Cordage Trust is capitalized at $25,000,000. It controls 
twenty-five cordage plants in six States. Application will be made at 
once in the other four States to have receivers appointed. 

The Cordage Company was organized two years ago under the 
laws of New Jersey for the importation of hemp and the manufacture 
and sale of cordage. At one time the properties owned and controlled 
by the company were forty-nine in number, and were situated in 
many States and in Canada. The original capital stock was $10,000,- 
000 common and $5,000,000 preferred. In January it was announced 
that the company would issue $10,000,000 common stock to the stock- 
holders as a scrip dividend of 100 per cent to represent about $11,000,- 
000 of assets acquired by the company since its formation. Several 
days ago the company announced its intention to issue $2,500,000 
additional preferred stock. It has been understood all along that 
the company had a sterling credit with Drexel, Morgan and Company 
for $2,500,000, and for almost a like amount with Ladenburg, Thal- 
mann and Company. The directors are James M. Waterbury (Presi- 



54 THE NATIONAL CORDAGE COMPANY 

dent), John A. Tucker, G. Weaver Loper, Chauncey Marshall, E. R. 
Brinckerhoff, Charles L. Atterbury, Frank T. Wall, John C. Furman, 
and Elisha M. Fulton, Jr. 

It was ascertained from the note brokers that the Cordage people 
have been large borrowers on commercial paper endorsed by the 
directors. It is estimated that there is anywhere from $500,000 to 
$2,000,000 of this paper out, some of it representing the bills receivable 
of the company. These bills receivable were negotiated through 
banks in New England, which took them in batches of $100,000. 

The paper of the directors and the bills receivable have also been 
floated in the West with the McCormick Reapers Company of Chicago 
especially. The note brokers, however, said that the directors took 
up many loans of this kind yesterday. — The New York Sun, May 5, 
1893. 



EXPRESSIONS OF OPINION IN BANKING CIRCLES 

AT TIME OF FAILURE OF NATIONAL 

CORDAGE COMPANY 

The consensus of opinion in Wall street was that none of the banks 
were in danger, and that the panic had reached its height. At the 
same time all admitted that the situation was one of great uncertainty. 

H. B. Hollins, of H. B. Hollins and Company said: 

" Wall street has gone through a rather severe panic which has not 
been equalled since 1884. The stringency of the money market has 
been confined more particularly to the commercial world than to 
Wall street itself, owing to the fact that the banks in times like these 
prefer to lend their money upon collateral which is payable on demand, 
for the collateral can be sold. To-day's market was of course due 
to the complications of the Cordage people. As I understand it, 
it is simply a question of one or two individual operators, and the 
Cordage Company is in no way affected. Nevertheless, these matters 
always take a few days to clear up, and in the excitement of a market 
of this kind, the banks naturally calling for proper margins, many 
weak people are compelled to sacrifice their holdings. 

" I think the worst has passed, however, and that things will resume 
a normal condition. While many good dividend-paying securities 
are selling much below their value, which has induced good buying 
by outside parties, still the street cannot recover immediately. All 
danger of further liquidation, except so far as may concern the men 
interested in the specialty above named, seems to be over." 

President Henry W. Cannon, of the Chase National Bank, was not 
quite so hopeful. Asked whether the banks were calling in loans 
on merchants, or whether they were demanding additional collateral, 
he said: 

Thinks the Currency Question Responsible 

" There is nothing very unusual in the money market. The margins 
on loans have been well kept up through the day, and so far as I 
know there has been no disposition on the part of the banks to crowd 
borrowers. I see no reason why rates should be raised. The banks 
are well prepared for any emergency, and I do not think rates will be 

ss 



56 THE NATIONAL CORDAGE COMPANY 

materially advanced, although some belated borrowers may have to 
pay high rates." 

" Are any stocks being discriminated against in loans ? " 

" I think the banks are loaning pretty generally on mixed collaterals 
as usual, although there may be some discrimination against some of 
the industrial securities which have fluctuated very widely." 

" Has the bottom been reached or do you anticipate a still greater 
panic ? " 

" In a number of instances to-day investors have come to the market, 
purchased stocks for cash and taken them away. It is, of course, 
difficult to predict what trend prices may take, but many prominent 
people are of the opinion that a reaction will take place and better 
prices prevail." 

" What is the cause of the present situation ? " 

" It is difficult to ascribe any specific cause, but, as is well known, 
the public have been troubled about the currency and monetary 
conditions. This feeling has developed a lack of confidence which 
has culminated in a desire to realize on securities and led to the present 
disturbed condition of affairs." 

" Are any of the banks threatened with serious trouble ? " 

" Quite the contrary. I think they are in a very strong condition." 

Views of Clews 

" The break in Cordage," said Mr. Clews, " exemplifies the erratic 
character of a large class of our people and goes to show that if they 
are only given enough rope they will hang themselves. The action 
of the managers of the cordage company a few days ago in deciding 
to issue $2,500,000 of preferred stock for working capital of the com- 
pany was a notice to Wall street such as Napoleon gave when disaster 
overtook him on the field of Waterloo. Everybody who held any 
of the stock has been running for dear life to save himself. Hence 
the slump in prices." 

President King of the Union Trust Company, No. 80 Broadway, 
said it was difficult to say whether the panic had reached its height. 
He believed, however, that it had nearly if not quite done so. 

" The great cause that underlies this disturbance," he said, " is the 
apprehension that there will be a change from the gold standard to 
a silver standard. If the country could have any assurance that the 
Sherman Silver bill would be repealed, and no other silver legislation 
substituted — that we had gone as far as we intended in the purchase 



COMMENT AT TIME OF FAILURE 57 

of silver — confidence would revive and we should be able to conduct 
our business on a much more healthy and prosperous basis." 

A Panic and that is all 

President Simmons, of the Fourth National Bank, declined to dis- 
cuss the situation in detail. 

" We're in a panic," he said, " and that's all we can say just now. 
We all hope there will be an improvement after this large liquidation, 
but, of course, we can't tell anything about it with any degree of cer- 
tainty." 

President Tappen, of the Gallatin National Bank, No. 36 Wall 
street, when asked if his institution was calling in loans on merchants, 
replied that on the contrary it had been lending money yesterday. 

" We have not raised our rates," he said, in reply to another ques- 
tion. " We haven't loaned a dollar at over 6 per cent." 

Mr. Tappen said he believed that the panic was over, but added 
that it was impossible for any one to tell. — New York World, May 5, 
1895. 

Mr. John Good is reported as saying that the first proposition he 
would make for the reorganization of the National Cordage Company 
is to advance prices to 1 1 cents on Manila and 9 cents on Sisal. He 
says the chief cause of failure was manufacturing below cost since 
the John Good contract was broken. The latter was to have $200,000 
a year for stoppage of works, and the National Cordage had an option 
upon the company's patents for $7,000,000. 

In Kansas City, May 10, William Deering and Company, manu- 
facturers of Chicago, through their attorneys, levied attachment 
upon 1,250,000 pounds of binding twine, the property of the National 
Cordage Company. The twine is in the possession of the Kansas 
City branch of the concern. It was attached by the Deerings to 
secure a debt of $100,000. — 56 Chron. 793, May 13, 1893. 



FIRST REORGANIZATION CIRCULAR 

New York, June 21st, 1893. 
To the Creditors and Stockholders of the National Cordage Company: 

The undersigned have been requested to act as a Reorganization 
Committee to investigate the affairs of the National Cordage Com- 
pany and to devise a plan for its reorganization. They report as 
follows: 

Their examination into the affairs of the Company leads the 
Committee to believe that the chief impediment to the financial 
success of this Company has been that of lack of adequate working 
capital. This did not present itself as a practical difficulty to the 
stockholders or directors so long as the commercial and financial 
markets remained in a normal condition, except that it has obviously 
increased the Company's expenses, and, to a certain extent, diverted 
the attention of the officers and directors from the management 
of the manufacturing business of the Company. 

The great prosperity of the business, also, and the experiments 
attending its formative period, have induced a scale of expenditure, 
both in purchases and in management, which may be avoided in the 
future. 

But special conditions of the money market, well understood by 
all parties in interest, confronted this Company about May 1st, 
1893. At this time of the year stocks of merchandise in this business 
are always largest; the distributing season for binder twine had just 
arrived; large amounts of money were required to ship this twine 
and to sell it on time payments; the Company was more extended 
than at any other period of the whole year, and the most active 
season for all the other products of the Company was setting in. 
At this time, therefore, when the Company most needed large 
amounts of capital, the condition of the money market made it 
impossible for the Board of Directors of the National Cordage 
Company to find sufficient capital for the renewal of maturing 
obligations. 

Under these prevailing conditions, the sale of additional preferred 
stock, as approved by the Board of Directors in a resolution dated 



FIRST REORGANIZATION CIRCULAR 59 

April 29th, 1893, was also found to be impracticable. The emer- 
gency thus created called for prompt and radical action. Therefore, 
on May 4th, 1893, it was decided by the Directors and various 
creditors and stockholders of the Company that the Company 
must be put in the hands of the receivers, to protect alike the interests 
of creditors and stockholders. 

The Chancellor of New Jersey appointed Edward F. C. Young 
and G. Weaver Loper as receivers of the Company. After the 
receivers had qualified, they addressed the following communication 
to the principal creditors and some large stockholders of the Com- 
pany: 

" Dear Sirs: 

" The undersigned, receivers of the National Cordage 
Company, find it highly desirable, in their efforts to protect the 
" property for the benefit of all concerned, that some committee 
" representing the creditors and the parties interested should be 
" appointed to confer with them as to questions of policy, and 
" to further some steps for the ultimate reorganization of the 
" affairs of the Company. 

" We therefore address you, understanding that you have 
" some interest directly or for others in these matters, and 
" express our strong desire that steps should be taken in the 
" direction indicated. 

" Yours truly, 

" (Signed) E. F. C. Young, 

" G. Weaver Loper, 

" Receivers." 

In response to this letter, a meeting, called together by the re- 
ceivers, was held on the 8th day of May, at which there was unani- 
mously appointed as a Reorganization Committee Mr. George C. 
Magoun, of Baring, Magoun & Co.; Mr. Ernst Thalmann, of 
Ladenburg, Thalmann & Co., and Mr. Gustav H. Gossler, of G. 
Amsinck & Co. At this meeting also, the presidents of three of 
the largest New York Banks consented to act as an advisory com- 
mittee, in conjunction with the Reorganization Committee. 

The firm of Messrs. Deloitte, Dever, Griffiths & Co., chartered 
accountants, of London, England, and New York, was employed 
to make a thorough investigation of the books of the Company. 



60 THE NATIONAL CORDAGE COMPANY 

At the same time an investigation was begun, and is now in progress, 
concerning the physical condition and value of the various properties 
and the legal status of the Company. This latter investigation 
is not yet concluded, but the importance of keeping the business 
going by a prompt reorganization is so great as to induce the com- 
mittee not to await the completion of this investigation before 
recommending action by stockholders and creditors. 

PRESENT CONDITION OF THE COMPANY 

The increase of the production of the various mills is shown by the 
books of the Company to be as follows: 

Pounds of Rope and Binder Twine Made 

Year ending October 31, 1890, 43,411,725 pounds. 

do. do. 1891, 74,704,835 do. 

do. do. 1892, 130,315,156 do. 

Six months, ending April 30, 1893, . . 80,777,197 do. 

Assets and Liabilities 

Messrs. Deloitte, Dever, Griffiths & Co. have just finished their 
preliminary examination, and the Committee refer to their report 
on the annexed sheet. 

As to the present financial condition of the Company, their report 
shows that the book value of all assets (after writing off the amounts 
recommended by the Committee) amounts to $25,732,517.89, and 
that the liabilities (exclusive of capital stock), amount to $11,986,- 
417.71. Among these assets are included twenty mills and plants, 
all going concerns, of which eight are held under lease from the 
security corporation. The transaction of increasing the common 
stock from $10,000,000 to $20,000,000, as shown by the records 
of the Company, has not yet been carried into the books of account. 
When this shall have been done, an increase in the book value of 
assets will be shown. 

Whatever may be the result of the appraisement now in progress, 
the Committee is of the opinion that such result will show the value 
of these assets, as assets of a going concern, to be very considerably 
in excess of the amount of the liabilities. 

If, however, on account of the refusal of the stockholders to assent 
to the present plan of reorganization, or for other reasons, it should 



FIRST REORGANIZATION CIRCULAR 6 1 

become necessary to liquidate the affairs of the Company at once, 
the Committee is unable, at the present stage of their investigation, 
to express an approximate opinion as to the result. 

The books and accountants' statement shows that dividends 
were declared and paid to stockholders as follows: 

For the year ended Nov. ist, 1891, $1,300,000 

do do do 1892, 1,450,000 

do six months ended May ist, 1893, .... 800,000 

The Committee have not thought it advisable to attempt to state 
a profit and loss account for the past six months, because this would 
involve a stoppage of the business of the various mills for the pur- 
pose of taking an inventory, and because a detailed examination 
of the books of the various concerns would involve a further delay 
of several weeks in the proposed reorganization, and because the 
present, and perhaps temporary, low price of raw materials would 
probably not fairly represent at the moment the real condition 
of the Company. 

As a matter of abundant precaution, however, the Committee 
has recommended a reduction of the book estimate of the value 
of merchandise assets and other items, to the extent of $1,501,000, 
which represents a reduction in value accruing since the end of the 
last fiscal year, and especially since the appointment of receivers. 
They made this reduction before reaching the figures which they have 
hereinbefore stated as approximately representing the condition 
of the Company. 

To Messrs. George C. Magoun, ) „ ... 

^ _, I Reorganization 

Ernst Thalmann, > _ 6 
~ TT ~ I Committee. 

gustav h. gossler, j 

Gentlemen: 

We have had submitted to us the Treasurer's Books and Vouchers 
of the National Cordage Company, and from an examination of 
them and with the information afforded us by the Officials of the 
Company we find that, exclusive of the book values of the Real 
Estate, Plant, and Good- will, etc., the Assets on the evening of the 
4th May, 1893, amounted to $10,463,657.13, the details of which 
appear on the attached Statement of Assets, and their value is 
subject to our Notes thereon. 



62 THE NATIONAL CORDAGE COMPANY 

We find the value of the Real Estate, Plant, and Good- will, etc., 
as recorded in the Books of Account, to be $14,931,360.76 and 
the amount paid on account of the purchase of the Security Mills 
to be $337,500.00, but we cannot form any opinion as to the true 
value of these Assets. 

The Security Mills were leased to the Company, November 1st, 
1891, from the Security Corporation, under a lease providing for 
a rental of $360,000 per year, and a sinking fund of $225,000 per 
year to apply upon the purchase price of the property, as represent- 
ing which purchase price $6,000,000 in bonds were issued by the 
Security Corporation and secured by a mortgage to the Manhattan 
Trust Company. By the payment of $337,500, three hundred and 
fifty-three bonds have been purchased and cancelled. 

The Liabilities, as they appear on the Books and Records of the 
Company under date of 4th May, 1893, amount to $11,986,417.71, 
and we have obtained a Certificate from the Treasurer that all 
known Claims are included in that amount. 

From the following Statements, and subject to our Notes and 
Remarks contained thereon, the Libilities are in excess of the Assets 
by $1,522,760.58; this result, however, is before taking into consider- 
ation the value of the Real Estate, Plant, Machinery, Good-will, 
etc., etc., and the Security Mills, which, according to the original 
entries in the Books of Account, together aggregate the sum of 
$15,268,860.76. 

We are, Gentlemen, 

Your obedient servants, 

Deloitte, Dever, Griffiths & Co., 
Chartered Accountants. 

4 Lothbury, London, E. C. 
and 
69 Wall Street, New York City. 

10th June, 1893. 



FIRST REORGANIZATION CIRCULAR 63 



Assets 

Particulars Assets Pledged Total Assets 

Cash and Bank Balances, at Central Office, and 
at Agencies, as acknowledged by the Bankers 
and Agents $47,965.43 

Cash deposited with the Old Colony Trust Com- 
pany, viz., $10,000.00, as acknowledged by 

them, and a cash loan of $15,000.00 25,000.00 

NOTE: — The Loan of $15,000 is unsecured. 

Open Accounts, including an amount of $413,- 
842.29 due from the Chicago and Pittsburgh 
Agencies, as per the Agents' latest statements 
and advices. $143,000.00 822,200.30 

NOTE: — 

The Open Accounts, amounting to $408,- 
358.01, have every appearance of being 
recoverable in full, and we are assured that 
such is the case. 

Unearned Premiums of Insurance on Hemp Car- 
goes, as per Policies, and balance of Insurance 
due for Salvage, since paid. 43,601.64 

Value of Claims for Allowances on the purchase 
of Hemp, Freight Overcharges, Customs 
Drawbacks, and Railroad Shortages, etc., as 
estimated by the Treasurer of the Company. 21,500.41 

Notes Receivable: — 

Given by Sub-Companies $879,562.31 497,475.47 

Other Notes 143,276.24 16,500.00 

$1,022,838.55 1,022,838.55 

NOTE: — 

On the 31^ May, 1893, the 

Notes in the possession of 

the Company and submitted 

to us amounted to $460,430.41 

The Notes out for Collection, 

as recorded in the Books, 

amounted to 27,576.68 

The Notes due and paid to the 

Receivers and recorded in the 

Receivers' Books amounted 

to 20,855.99 



Carried forward $508,863.08 $656,975.47 $1,983,106.33 



6 4 



THE NATIONAL CORDAGE COMPANY 

Particulars Assets Pledged Total Assets 

Brought forward $508,863.08 $656,975.47 $1,983,106.33 

And the Notes Pledged to 
Bankers, for which we 
have their acknowledgment, 
amounted to 513,975-47 

$1,022,838.55 

The Ordinary Trade Notes, 
amounting to $143,276.24, 
appear to be good and recov- 
erable, and none of them are 
overdue. 

Balance due from Note Brokers for the sale of 
Notes given by the Sub-Companies, as per 
statements rendered by them. 138,596.00 

NOTE: — 

Of the balance due from Note Brokers, viz.: 
$138,596.00, the collection of $134,679.49 
is dependent upon the solvency of the East- 
ern Mills, which went into the hands of 
Receivers on the Sth May, 1893. H ^ s t 
however, fair to state in regard to this that 
the Eastern Mills would be solvent if this 
Company discharged its indebtedness to 
them, the amount of which is included in the 
Statement of Liabilities. 

Stock of Manila, Sisal and New Zealand Hemp 
and Rope, and Stock of Binder Twine, the 
Market Value of 4th May, 1893, being certi- 
fied to by the President and the Treasurer of 
the Company. 4)896,935.05 7,189,407.42 

NOTE: — 

The Inventory prices are subject to Market 
fluctuations from day to day, but the Presi- 
dent and Treasurer of the Company state 
that this same Stock of Merchandise at 10th 
June, 1893, would not represent a sum less 
than $7,189,407.42. 

Stock of Merchandise at Pittsburgh and London 

Agencies, as per the Agents' Statements. 1,221.16 

Payments on account of Manila Hemp Ship- 
ments, as per Invoices and Bills of Lading, 
and Insurance on Cargoes, as per Marine In- 
surance Policies. 329,917.29 
Carried forward $5,553>9 IO -52 $9,642,248.20 



FIRST REORGANIZATION CIRCULAR 65 

Particulars Assets Pledged Total Assets 

Brought forward $5,553,910-52 $9,642,248.20 

Investments (At Cost) : — 

Security Bonds $366,025.00 344,000.00 

Hoover & Allison Twine 

Company 60,000.00 

$426,025.00 426,025.00 



NOTE: — 

These Investments have been taken at Cost, 
and the Treasurer of the Company has 
certified that they are not overvalued at 
$426,025.00. 
Indebtedness of Mills controlled by the Com- 
pany. 395,383-93 

NOTE: — 

The value of this Debt is subject to the Assets 
of each Mill being in excess of its Liabili- 
ties, and there is no complete evidence in 
this respect, as we have not seen the Books of 
these Mills 





$5,897,910.52 


$10,463,657.13 


LIABILITIES 

Particulars 


Amount of Col- 
lateral Security 


Total 
Liabilities 


Hemp Acceptances against Shipments and Sterl- 
ing Acceptances. 




$1,209,723.81 


Collateral Loans, including accrued Expenses to 
4th May, 1893. 

Secured by Merchandise. 

Security Bonds. 
" Book Debts. 

Notes Receivable. 


$4,896,935.05 
344,000.00 
143,000.00 
513,975-47 


5,596,705.66 



Notes Payable: — 

Company's own Paper dis- 
counted, $541,000.00 
Atlantic Mutual Insurance Co., 56,010.60 

$597,010.60 597,010.60 

Due on Open Accounts, including 
an amount of $425,882.39 for 
Manufacturing Contracts and 
interest accrued to 4th May, 

1893, on the Security Bonds. 957,603.67 

Carried forward $5,897,910.52 $8,361,043.74 



66 THE NATIONAL CORDAGE COMPANY 







Amount of Col- 


Total 


Particulars 




lateral Security 


Liabilities 


Brought forward .... 




$5,897,910.52 


$8,361,043.74 


Due to Mills controlled by the 




Company: — 








For their Notes given to and 








sold by the Company 


$3,029,486.70 






Excess of Credit Balances on 








the several Mill Accounts in 








the Company's Books over 








the Balances due by the 








Mills to the Company 


595,887.27 








$3,625,373.97 




3,625,373.97 



NOTE: — 

The Liabilities of this Company to the several 
Mills would be increased if the off-set of 
Balances due by the Mills to the Company 
proved to be irrecoverable on account of the 
Assets of each Mill being less than its Lia- 
bilities, and there is no complete evidence in 
this respect as we have not seen the Books of 
these Mills 



$5,897,910.52 $11,986,417.71 



SUMMARY 

Assets (page 65), $10,463,657.13 

Book Value of Real Estate, Plant, Machinery, Goodwill, 
etc., etc., and payments on account of security 
Mills, 15,268,860.76 

Total Assets, subject to the foregoing remarks, $25,732,517.89 

Total Liabilities, 11,986,417.71 

$13,746,100.18 



The Committee find, on examination of the accounts, that prior 
to October, 1891, sundry operations in merchandise, of a more or 
less speculative character, and not likely to occur again, were made, 
which resulted in loss to the Company. It is due, however, to 
state that some of the Directors who advocated such transactions, 
voluntarily made good the loss so sustained at about the time it 
occurred, so that the Company itself has not been the loser thereby. 

The Committee do not find that any funds of the Company 
have been employed in any stock or other speculations other than 
those above mentioned. 



FIRST REORGANIZATION CIRCULAR 67 

As the result of their preliminary investigation, the Committee 
feel justified in expressing the following 

ESTIMATE OF THE FUTURE OF THE BUSINESS 

They are of the opinion that the business of the Cordage Company, 
under prudent and conservative management, and with the additional 
working capital recommended by them, can be made to produce 
very satisfactory results, sufficient for the payment of interest on 
the bonds proposed to be issued and for the payment of dividends 
upon the proposed preferred stock, and for the payment, in good 
years, of satisfactory dividends upon the common stock. 

In this connection, they call attention to the fact that the payments 
for interest for the year ending October 31st, 1892, alone, amounted 
to $430,102.56, and for the six months ending May 1st, 1893, $269,- 

250-43- 

The anticipated saving upon this item of interest alone would 
pay the interest on the proposed bonds and a portion of the divi- 
dends on the preferred stock. It is just to add that the principal 
officers and directors of the Company, being largely interested in 
it, have never received any salaries. 

The Committee therefore submit the following 

SUGGESTIONS 

With a view to certain proposed changes in the business manage- 
ment of the Company, the number of the Board of Directors should 
be increased, and a majority of the present directors should resign, 
to make room for new members of the Board, to be approved by the 
Reorganization Committee and by the United States Trust Com- 
pany of New York. 

This having been done, radical changes and reduction of expenses 
in many departments can be advantageously effected, new business 
methods, especially in the financial department, introduced, un- 
necessary offices abolished, concentration of management secured, 
and provision made for the protection and promotion of the busi- 
ness interests of the Company in all directions, whether this business 
be continued by the present organization, or by a new organization 
to be formed. 

The Committee especially recommends that the financial part 
of the business should be put under the management of a finance 



68 THE NATIONAL CORDAGE COMPANY 

committee in charge of this department of the business at the Home 
Office, as well as at branch offices. 

In order to continue the business of the Company, money must 
be provided, 

(i.) To pay its existing debts; 

(2.) To supply it with adequate working capital. 

The simplest method for providing these necessary funds is by 
the voluntary action of the stockholders and creditors of the Com- 
pany. If the stockholders and creditors decline to co-operate in 
procuring these funds, the Company can continue its business only 
by incurring a very considerable additional debt, which would 
make its stocks of doubtful value, or by a judicial sale of its 
properties to or for the benefit of a new company, freed from 
some of the present obligations, or by proceedings to assess stock- 
holders. 

If the reorganization which the Committee suggests be carried 
out, the following, generally speaking, will be 

THE PURPOSES OF THE PLAN 

(1.) To fund and extend a portion of the present debt by means 
of bonds to be issued; 

(2.) To supply an adequate working capital, mainly by the volun- 
tary contributions of stockholders ; 

(3.) To deliver to stockholders as a consideration for these con- 
tributions preferred stock of the Company at par; 

(4.) To acquire such additional properties as the stockholders 
and the Reorganization Committee may hereafter deem to be 
desirable in the interests of the Company. 

To carry out these purposes, the Committee proposes the follow- 
ing: 

PLAN 

1. The National Cordage Company (or some successor corpora- 
tion) will issue collateral trust first mortgage bonds having thirty 
years to run, secured by a mortgage on all the mortgageable prop- 
erty of the National Cordage Company (or its successor corpora- 
tion) , including its lease from the Security Corporation, to an amount 
not exceeding Six Million Dollars, bearing six per cent, interest, 



FIRST REORGANIZATION CIRCULAR 69 

with a sinking fund of three per cent, per annum after 1895. One 
Million Dollars par value, or so much as may be necessary, of these 
bonds will be retained by the trustee, subject to the order of the 
Board of Directors evidenced by a vote of at least two-thirds in 
number of the Board, for the purpose, among other things, of paying 
off existing prior liens on the Union Mills. Five Million Dollars 
par value of these bonds, or so much thereof as may be deemed 
necessary by the Committee, will be sold and the proceeds used, 
among other things, in paying off the existing debts of the Company, 
or will be delivered to present creditors of the Company in satisfac- 
tion of those debts, in full or in part. The bonds will be so sold or 
paid at the price or rate of 85%. 

As many as possible of these Five Million Dollars par value of 
bonds will be underwritten by a guaranty syndicate at 85%, for a 
commission of 5%. 

Before being offered for sale elsewhere, or to the creditors in pay- 
ment of debts, the whole of these bonds will be offered to the stock- 
holders for subscription at 85%. 

The stockholders of the Company, both preferred and common, 
will have the right, until and including July nth, 1893, to subscribe 
for these bonds at this price. If the issue should be oversubscribed 
by the stockholders, allotments will be made pro rata in the pro- 
portion which their respective holdings of stock bear to the total 
capital stock, both preferred and common, of the Company. 

2. For the purpose of delivery to contributing stockholders, the 
preferred stock of the National Cordage Company now amounting 
to $5,000,000, will be increased to $8,000,000. This increased 
issue will have the same privileges as the present preferred stock. 

Each preferred stockholder will pay to the Reorganization Com- 
mittee, or its nominee, at such times and in such amounts as the 
Reorganization Committee shall designate, a sum of money equal 
to twenty per centum of the par value of their holdings of preferred 
stock, and will receive in exchange for such payments preferred 
stock of the Company at par. 

Each common stockholder will pay to the Reorganization Com- 
mittee, or its nominee, at such times and in such amounts as the 
Reorganization Committee shall designate, a sum of money equal 
to ten per centum of their holdings of common stock of the Com- 
pany, and will receive in exchange for such payments preferred 



JO THE NATIONAL CORDAGE COMPANY 

stock of the Company at par. If any of the holders of common stock 
prefer not to pay this sum in cash, they can make their contribution 
by assigning to and delivering to the Reorganization Committee, 
or its nominee, to be used for the purposes of the reorganization, 
certificates for fifty per centum par value of their respective holdings 
of common stock, but, in this event, they will receive no preferred 
stock for their contribution. 

If, under this plan, it becomes necessary to provide for fractions 
of shares, either in the distribution of new Preferred Stock, or the 
payment of contributions in Common Stock, then the Reorganiza- 
tion Committee will make such adjustments, through the Trust 
Company, by the delivery of script receipts redeemable in stock, 
when such receipts shall be presented and surrendered in lots of 
$100 or any multiple thereof in par value. 

3. If the Stockholders do not unanimously consent to the fore- 
going plan, or do not consent with sufficient unanimity to satisfy 
the Reorganization Committee, then the Reorganization Committee 
will take such measures, either by increasing the debt of the present 
Company, or by winding up the affairs of the present Company, 
selling out its assets, and organizing another company for the pur- 
chase of these assets and the continuance of the business of the 
National Cordage Company, or otherwise, as they think advisable. 
The Stockholders who assent to such plan and become parties to 
such reorganization agreement, however, will occupy substantially 
the same relative position and will have a corresponding interest 
in the reorganized Company or in the new Company, as is herein 
proposed; but the stockholders of the National Cordage Company, 
whether preferred or common, who do not assent to such plan and become 
parties to such reorganization agreement will not be represented in 
and will not have any right or interest in such reorganized or new com- 
pany. 

The Committee cannot too strongly urge all interested parties, 
both creditors and stockholders, to co-operate in this plan of re- 
organization. The properties must be kept together, and the rights 
of creditors and stockholders preserved and protected by keeping 
the assets intact and carrying on the business. It is equally clear 
that the shareholders, both preferred and common, must agree 
to make such proper contribution for working capital as the cir- 
cumstances of the Company demand. A prompt acceptance of 



FIRST REORGANIZATION CIRCULAR 7 1 

this plan by all parties will avoid troublesome litigation between 
creditors and stockholders and will very materially increase the future 
value of their property. 



George C. Magoun 

Ernst Thalmann, 

^ TT ~ I Committee 

GUSTAV H. GOSSLER, I 



' [Reorganization 



REORGANIZATION AGREEMENT 

This Agreement, made this nineteenth day of June, 1893, by 
and between Frederick W. Vanderbilt, Joseph J. O'Donohue, Charles 
H. Senff, James M. Waterbury, and all others in like interest who 
sign this agreement or a duplicate thereof, or who deposit as herein- 
after provided their certificates of Preferred Stock in the National 
Cordage Company, hereinafter called the Preferred Stockholders, 
parties of the first part, and Work, Strong & Co., Washington E. 
Conner, Decker, Howell & Co., Woerishoffer & Co., and all others 
in like interest who sign this agreement or a duplicate thereof, or 
who deposit as hereinafter provided their certificates of Common 
Stock in the National Cordage Company, hereinafter called the 
Common Stockholders, parties of the second part, and George C. 
Magoun, Ernst Thalmann and Gustav H. Gossler, of the City, 
County and State of New York, hereinafter called the Reorganiza- 
tion Committee, parties of the third part, and the United States 
Trust Company of New York, as trustee, hereinafter called the 
Trust Company, party of the fourth part, WITNESSETH: 

Whereas, receivers of the National Cordage Company have been 
appointed by the Court of Chancery of the State of New Jersey 
upon the ground of the insolvency of that company, and the affairs 
of that company are in such a condition as to make it essential for 
the continuance of its business and the protection of its stockholders 
and creditors that the said National Cordage Company should 
either obtain additional capital to the amount of from Five to Seven 
Million Dollars in order to pay its existing debts and to provide 
it with adequate working capital, or that it should be reorganized 
through the medium of said receivership or of this agreement, or 
otherwise, or that it should be dissolved and its business and affairs 
liquidated and its property sold for the benefit of its creditors and 
stockholders ; 

And whereas, the said National Cordage Company has already 
entered into negotiations with certain of its stockholders and cred- 
itors and members of the Reorganization Committee looking to the 
procurement of such additional capital or other reorganization of 
its affairs; 



REORGANIZATION AGREEMENT 73 

And whereas, the parties of the first part are holders and owners 
of Preferred Stock in said National Cordage Company, and the 
parties of the second part are holders and owners of Common Stock 
in said company, and both said parties of the first part and second 
part wish to co-operate with each other and with all others in like 
interest who elect to co-operate with them for the purpose of a 
reorganization of the affairs of said National Cordage Company; 

And whereas, the Reorganization Committee, having been 
requested to examine into the conditions of the affairs and business 
of the said National Cordage Company and to suggest a plan for 
accomplishing the purposes aforesaid, have made the following 
suggestions, to wit: 

Suggestions of the Reorganization Committee 

In the opinion of the Committee the business of the Na- 
tional Cordage Company is a valuable one which should be 
continued. To do this money must be provided for the com- 
pany, (1) to pay its existing debts; (2) to supply it with adequate 
working capital, which is has not heretofore had. The simplest 
method for providing these necessary funds is by the voluntary 
action of the stockholders and creditors of the company. 

If the stockholders and creditors decline to co-operate 
in procuring these funds, it can continue its business only by 
incurring a very considerable additional debt, which would 
make its stocks of doubtful value, or by a judicial sale of its 
properties to or for the benefit of a new company, freed from 
some of the present obligations, or by proceedings to assess 
stockholders. 

The purpose of this Reorganization Committee is to reor- 
ganize the affairs of this company so that its present indebted- 
ness shall not be appreciably increased and so that a portion 
of it shall be funded and extended, and so that it shall be pro- 
vided with what, in the judgment of the Committee, is an 
adequate working capital for its future needs, and so that, 
this having been done with the co-operation and contribution 
of the stockholders, the stock of both classes shall have a greater 
intrinsic value than at present. The purpose of the Committee 
is that the stockholders who contribute under this plan shall 
receive ample consideration for their contributions of money, 



74 THE NATIONAL CORDAGE COMPANY 

and shall at the same time materially increase the value of their 
present holdings. 

Generally speaking, 

The Purposes of the Plan 
are: 

(i.) To pay the existing debts with first mortgage and 
collateral trust bonds (or their proceeds) secured by a first 
mortgage on all the mortgageable property of the company, 
including its lease from the Security Corporation. 

This would not increase the amount of its present indebted- 
ness, but would fund it and postpone the date of its payment. 

(2.) To provide adequate working capital for the business 
of the company by the sale of bonds and by voluntary contribu- 
tions from both the Preferred and Common stockholders, 
who are to receive Preferred Stock of the Company, dollar for 
dollar, for the amount so contributed by them. 

(3.) To acquire such additional properties as the stock- 
holders and the Reorganization Committee may hereafter 
deem to be desirable in the interests of the Company. 

Plan 

(1.) The National Cordage Company (or some successor 
corporation) will issue collateral trust first mortgage thirty 
year bonds, secured by a mortgage on all the mortgageable 
property of the National Cordage Company (or its successor 
corporation), including its lease from the Security Corporation, 
to an amount not exceeding Six Million Dollars, bearing six 
per cent, interest, with a sinking fund of three per cent, per 
annum after 1895. One Million Dollars par value or so much 
as may be necessary of these bonds will be retained by the 
trustee for the purpose, among other things, of paying off 
existing prior liens on the Union Mills. Five Million Dollars 
par value of these bonds, or so much thereof as may be deemed 
necessary by the Committee, will be sold and the proceeds 
used, among other things, in paying off the existing debts of 
the company, or will be delivered to present creditors of the 
company in satisfaction of those debts, in full or in part; the 
bonds will be so sold or paid at the price or rate of 85%. 



REORGANIZATION AGREEMENT 75 

As many as possible of these Five Million Dollars par 
value of bonds will be underwritten by a guaranty syndicate 
at 85%, for a cash commission of 5%. 

Before being offered for sale elsewhere, or to the creditors 
in payment of debts, the whole of these bonds will be offered 
to the stockholders for subscription at 85%. 

The stockholders of the company, both Preferred and 
Common, will have the right, until and including July nth, 
1893, to subscribe for these bonds at this price. If the issue 
should be oversubscribed by the stockholders, allotments 
will be made pro rata in the proportion which their respective 
holdings of stock bear to the total capital stock, both Preferred 
and Common, of the company. 

(2.) For the purpose of delivery to contributing stock- 
holders, the Preferred Stock of the National Cordage Company, 
now amounting to $5,000,000, will be increased to $8,000,000. 
This increased issue will have the same privileges as the present 
Preferred Stock. 

Each Preferred Stockholder will pay to the Reorganization 
Committee, or its nominee, at such times and in such amounts 
as the Reorganization Committee shall designate, a sum of 
money equal to twenty per centum of the par value of his 
holdings of Preferred Stock, and will receive in exchange for 
such payments Preferred Stock of the company at par. 

Each Common Stockholder will pay to the Reorganization 
Committee, or its nominee, at such times and in such amounts 
as the Reorganization Committee shall designate, a sum of 
money equal to ten per centum of his holdings of Common 
Stock of the company, and will receive in exchange for such 
payments Preferred Stock of the company at par. If any of 
the holders of Common Stock prefer not to pay this sum in 
cash, they can, in lieu thereof, make their contribution by assign- 
ing to and delivering to the Reorganization Committee, or its 
nominee, to be used for the purposes of the reorganization, 
certificates for fifty per centum par value of their respective 
holdings of Common Stock, but, in this event, they will receive 
no Preferred Stock for such contribution. 

If, under this plan, it becomes necessary to provide for 
fractions of shares, either in the distribution of new Preferred 
Stock or in the payment of contributions in Common Stock, 



76 THE NATIONAL CORDAGE COMPANY 

then the Reorganization Committee will make such adjustments, 
through the Trust Company, by the delivery of script receipts 
redeemable in stock when such receipts shall be presented and 
surrendered in lots of $100 or any multiple thereof in par 
value. 

Bonds and proceeds thereof will be used in paying Com- 
pany's debts and for working capital; contributions of Stock- 
holders will be used for working capital. 

(3.) If the Stockholders do not unanimously consent to 
the foregoing plan, or consent with sufficient unanimity to 
satisfy the Reorganization Committee, then the Reorganiza- 
tion Committee shall take such measures, either by increasing 
the debt of the present company, or by winding up the affairs 
of the present company, selling out its assets, and organizing 
another company for the purchase of these assets and the con- 
tinuance of the business of the National Cordage Company, 
or otherwise, as they think advisable. The stockholders who 
assent to such plan and become parties to such reorganization 
agreement, however, will occupy substantially the same relative 
position and have a corresponding interest in the reorganized 
company or the new company as is herein proposed; but the 
stockholders of the National Cordage Company, whether Pre- 
ferred or Common, who do not assent to such plan and become 
parties to such reorganization agreement will not be repre- 
sented in and will not have any right or interest in such reor- 
ganized or new company. 

And whereas, it is the desire of the parties hereto that the business 
and affairs of the National Cordage Company should be reorgan- 
ized, and that it should continue in business if the necessary co- 
operation of its stockholders can be obtained, or that otherwise its 
business should be continued by a reorganized or new company, as 
suggested by the Reorganization Committee; 

And whereas, the Reorganization Committee are willing to use 
their best efforts to carry out a plan for the reorganization of the 
affairs and business of the National Cordage Company and the 
continuance of its business either by that corporation or by some 
reorganized or new corporation; 

Now, therefore, the parties hereto, in consideration of the 
premises, and of one dollar each to the other in hand paid, the receipt 



REORGANIZATION AGREEMENT J J 

whereof is hereby acknowledged, and of the promises and agree- 
ments hereinafter set forth, have promised and agreed, and do hereby 
promise and agree, to and with each other as follows: 

First. That they, the Preferred Stockholders, parties of the 
first part, will forthwith cause their and all of their certificates 
for Preferred Stock in the National Cordage Company to be assigned 
and transferred to and deposited with the United States Trust 
Company of New York, as trustee, for the purposes of the reorganiza- 
tion hereinafter provided for, and will simultaneously with such 
deposit pay to said Trust Company, as such trustee, and on or 
before the tenth day of July, 1893, a sum of money equal to ten 
per centum of the par value of the shares so deposited and will on 
or before August tenth, 1893, pay to said Trust Company as such 
trustee, a further sum of money equal to five per centum of the par 
value of the shares so deposited, and will also on or before September 
tenth, 1893, pay to said Trust Company, as such trustee, a further 
sum of money equal to five per centum of the par value of the shares 
so deposited. All of such money to be held and disposed of by 
said Trust Company subject to and upon the order of said Reorgan- 
ization Committee. 

Second. That they, the Common Stockholders, parties of the 
second part, will forthwith cause their said certificates of Common 
Stock in the National Cordage Company to be assigned and trans- 
ferred to and deposited with the said United States Trust Company, 
as trustee, for the purposes of the reorganization hereinafter pro- 
vided for, and that simultaneously with such deposit and on or 
before July tenth, 1893, they will pay to said Trust Company, as 
such trustee, a sum of money equal to five per centum of the par 
value of their shares of stock so deposited, and that on or before 
August tenth, 1893, they will also pay to said Trust Company, 
as such trustee, a further sum of money equal to five per centum 
of the par value of their shares of stock so deposited; or that if 
they fail to make said payments to said Trust Company, the deposit 
of the certificates for their said shares of stock shall operate as an 
authority and direction to said Trust Company to absolutely assign 
fifty per centum in value of their and each of their shares so deposited, 
freed from any trust, so far as said Trust Company is concerned, 
to the Reorganization Committee, to be used for the purposes of 
said reorganization (which authority is hereby expressly conferred 
upon said Trust Company), all of such money to be held and dis- 



78 THE NATIONAL CORDAGE COMPANY 

posed of by said Trust Company, subject to and upon the order of 
said Reorganization Committee. 

If any stockholder, whether preferred or common, or the assignee 
or holder of his certificate of deposit hereunder, shall default in 
making any of said payments, all payments theretofore made by 
him shall be forfeited and paid by the Trust Company to the Re- 
organization Committee, for the purposes of said reorganization, 
and such defaulting stockholder or assignee shall have no further 
rights hereunder, or as such stockholder. Said Trust Company, 
however, if so directed by said Reorganization Committee, shall 
at any time, waive such default, but only upon the receipt by it 
of payment in full of all sums of money agreed hereunder to be paid 
by such stockholder and then remaining unpaid. The Reorganiza- 
tion Committee, however, shall be under no obligation, express or 
implied, to direct such waiver. 

Third. Simultaneously with each deposit of the certificates 
with the said Trust Company, said Trust Company shall issue and 
deliver, in proportions according to the interests respectively repre- 
sented by the certificates so deposited, negotiable certificates of 
deposit, the amount of which, in the aggregate, shall equal the par 
value of the shares represented by the certificates deposited as 
aforesaid. Said certificates of deposit shall be respectively issued 
to the stockholders making such deposit, or to such person or per- 
sons, or corporation or corporations, and in such denominations as 
the respective depositors shall designate. 

The said certificates of deposit shall be in substantially the form 
following, to wit: 

" Certificate of Deposit of certificates for 
" stock of the National Cordage Company (hereinafter referred 
"to as shares of stock) deposited under an agreement between 
" the holders of certificates of preferred and common stock of the 
" National Cordage Company, and George C. Magoun, Ernst 
" Thalmann and Gustav H. Gossler, Reorganization Committee, 
" and the United States Trust Company of New York, dated June 
" 19th, 1893, and which agreement is hereby made a part of the 
" undersigned certificate of deposit, as fully as if the same were 
" textually inserted therein. 

" The United States Trust Company of New York hereby certifies 
" that it has received from shares 

" of stock as above stated, in trust, subject to the terms 



REORGANIZATION AGREEMENT 79 

" and conditions of the above-described agreement, and to be used 
" for the purposes therein stated by the Reorganization Committee 
" therein named, or a majority of them, or their successors, and the 
" holder and owner hereof, whether the original holder or owner, 
" or the assignee or successor in title or interest to or in the same, 
" or any thereof, or any right or interest therein, or thereunder, 
" assents to and is bound by the provisions of said agreement by 
" receiving this certificate. The holder hereof is entitled upon 
" the payment of $ to receive his proportionate 

" share of all the securities, benefits and advantages coming to the 
" depositors respectively of said shares of stock under said agree- 
" ment. 

" The interest represented hereby is, subject to the terms hereof, 
" assignable by the holder hereof, in person or by proxy, by transfer 
" upon the books kept by this company for that purpose, upon the 
" surrender of this certificate. 

" United States Trust Company of New York. 
"By 

" Secretary. 
" New York, 1893." 

" The total payment of cash to be made by the holder hereof 
" to United States Trust Co. of New York is $ 

" Received $ of said sum of $ 

" United States Trust Co. of New York. 
"by 
" Received $ of said sum of $ 

" United States Trust Co. of New York. 
"by 
" Received $ of said sum of $ 

" United States Trust Co. of New York. 
" by 
Upon receipt of the said shares of stock, said Trust Company 
shall from time to time on demand execute and deliver to said Reor- 
ganization Committee a proxy or proxies authorizing and entitling 
said Reorganization Committee or any one of them, or their or any 
of their successors, to vote for all purposes upon said shares of stock, 
and all of them, during the continuance of the trust hereby created 
as fully as said Trust Company, as the holder and owner thereof, 



80 THE NATIONAL CORDAGE COMPANY 

could vote, or, at the option of said Reorganization Committee, 
said Trust Company shall, so far as able to do so, and in any lawful 
way, at all times vote upon said shares of stock or any of them as 
directed by said committee, and shall as such stockholder, execute 
and deliver and revoke such consents for the increase or decrease 
of the capital stock, either common or preferred or both, and for 
the creation, issuance and sale of bonds or debentures or both, 
and for the mortgaging or pledging or both of the property or any 
part thereof of said company as shall be directed by said Reorganiza- 
tion Committee. 

Fourth. Dividends declared and paid by the said National 
Cordage Company upon the said shares of stock transferred and 
deposited as aforesaid, or any other beneficial interest to which 
said deposited shares are entitled, shall be received by the said 
Trust Company and distributed within five days after the receipt 
thereof, at the office of the said Trust Company, pro rata to any 
holders of said certificates of deposit applying therefor, but upon 
the express condition that all sums of money herein agreed to be 
paid by said applicant or by his assignor shall have been first paid 
in full. 

Fifth. Upon the termination of this agreement and the trust 
hereby created, the holder of any such certificate of deposit shall 
be entitled to receive from the said Trust Company, upon the sur- 
render of his certificate of deposit, his proportional share of all 
stock and other securities, benefits or property which shall have 
been received or acquired by said Trust Company by virtue of its 
holding of the said shares of stock deposited with it under this agree- 
ment, and which, in accordance with the plan of reorganization 
to be carried out as hereinafter mentioned, are distributable among 
the stockholders. 

Sixth. The said Reorganization Committee shall with all con- 
venient speed, after the deposit of said shares of stock of said Na- 
tional Cordage Company, representing a majority in amount of 
all the shares of stock of said company under this agreement, pro- 
ceed, under advice of counsel employed by them, to formulate a 
detailed plan for the reorganization of the affairs of the said National 
Cordage Company and of the mode in which the property held 
or controlled by it shall be administered in accordance with the law, 
and such Reorganization Committee shall forthwith proceed to 
take all such steps as may be necessary for carrying out and giving 



REORGANIZATION AGREEMENT 8 1 

effect to the reorganization of said business in accordance with such 
plan, including, if they deem it best, the dissolution of the said 
National Cordage Company, the liquidation of its affairs, the sale 
of its property, the organization of any corporation or corporations, 
association or associations, and the purchase of such properties 
or such interests as shall be provided in and by the said plan. 

Seventh. Each person being the holder of said shares of stock 
in said National Cordage Company and signing this agreement 
as one of the parties of the first part, or of the second part, and placing 
his said shares of stock in the trust hereby created, and each person 
so depositing his said shares of stock, although he may not have 
signed this agreement, by such deposit, and by receiving the certifi- 
cate of deposit in exchange therefor, and each assignee of such certifi- 
cate hereby appoints and authorizes and fully empowers the said 
Reorganization Committee, as the agents and attorneys of the holders 
of such shares of stock respectively, to consent to and carry out 
such plan of reorganization, as shall in their discretion be adopted 
by them, and such Reorganization Committee, its agents and 
attorneys, are hereby fully authorized to take any and all proceed- 
ings and steps at law or in equity, or otherwise, in their absolute 
discretion, as they may be advised, for the protection and interest 
of said shares. 

Eighth. Upon said shares of stock so deposited with the United 
States Trust Company, that company, as the owner and holder 
thereof, shall act in all matters and take or defend any proceedings, 
legal or otherwise, for, if, and as it may be directed by said Reorgani- 
zation Committee, and each assignee or successor in title or interest 
of such depositor shall take, subject to such power and authority; 
and in any legal proceedings instituted or which may be instituted 
in the course of or pending the completion of such reorganization, 
or which may be deemed advisable by said Reorganization Com- 
mittee, the said Trust Company shall, as the owner and holder of 
said shares of stock, deposited with and transferred to it, intervene 
and act for and in all respects as it may be requested by said Reor- 
ganization Committee, but neither the said Reorganization Com- 
mittee nor said Trust Company shall be bound to take any legal 
or other proceedings, nor to do any act hereunder, without being 
adequately indemnified against loss or expense, and said Trust 
Company shall incur no liability for anything done or permitted 
hereunder at the request or direction of said Reorganization Com- 



82 THE NATIONAL CORDAGE COMPANY 

mittee, nor for anything whatever hereunder not arising from its 
own willful default. 

Ninth. On any sale of the property or any portion thereof held 
by the said National Cordage Company, the Reorganization Com- 
mittee is authorized to purchase the same or any part thereof, upon 
such terms as it deems wise, and so far as it deems wise, and to apply 
in payment therefor the portion of the proceeds of such sale or sales 
coming or applicable to the said shares of stock so deposited with 
the United States Trust Company, and the United States Trust 
Company shall, by receipts, releases or assignments, or by surrender 
or cancellation of such shares of stock, or by other use of such shares 
of stock, or money received by said Trust Company in connection 
with said reorganization, or money payable to the holders thereof 
or otherwise, enable the Reorganization Committee to make pay- 
ment upon such sale or sales by such use of said certificates. The 
property so purchased shall be conveyed and assigned to said United 
States Trust Company in trust, to be held and disposed of by it for 
the purposes of said reorganization, in accordance with the direction 
of said Reorganization Committee. 

Tenth. Prior to the completion of such reorganization, the 
Reorganization Committee shall have power to release from this 
agreement the parties of the first and second parts hereto, subject 
to liabilities theretofore incurred by the Reorganization Committee 
hereunder, provided, however, that such release, if made, shall be 
of all said parties of the first and second parts, and upon such release 
being made in writing and deposited with the United States Trust 
Company, said Trust Company shall re-transfer to the respective 
holders of its receipts or certificates the shares so transferred to it 
or the number of shares represented thereby, on presentation and 
surrender of its said respective receipts and certificates. 

The deposit of such release shall, ipso facto, entitle the said Reor- 
ganization Committee to an accounting, discharge and release 
hereunder as hereinafter provided. 

Eleventh. Said Reorganization Committee is hereby authorized 
to incur any necessary or proper expenses in the course of the reor- 
ganization or any proceedings hereunder, whether for their own 
services, or expenses, or commissions in the sale of the property 
or securities, or counsel, or for the services, expenses or counsel 
fees of the United States Trust Company, or of others officially 
or otherwise assisting in said reorganization, or otherwise, as the 



REORGANIZATION AGREEMENT 83 

Reorganization Committee may deem wise, and to fix the amount 
of their own compensation for their services hereunder, and the 
amount of such expenses as approved by the Reorganization Com- 
mittee shall be first paid from money or property which would 
otherwise be payable to or distributable among the parties of the 
first and second parts, as holders of said Trust Company's certificates, 
or to the United States Trust Company as the holder of the certifi- 
cates so as aforesaid deposited with it. 

The Reorganization Committee shall be entitled at any time to 
a settlement and discharge in respect to their proceedings which 
shall have been theretofore had, and Edward King, President of 
The Union Trust Company of New York, and Louis Fitzgerald, 
President of The Mercantile Trust Company of New York, and 
John I. Waterbury, President of The Manhattan Trust Company 
of New York, of the City of New York, and their successors in their 
respective offices, or any two of them, are hereby constituted the 
irrevocable representatives of the parties of the first and second 
parts, their executors, administrators and assigns, holders of, or 
entitled to the said certificates or any of them, or to any in- 
terest or right thereunder, to and with full authority to pass 
upon and finally adjust the accounts of the said Reorganization 
Committee, and thereupon to give to its members a full release and 
discharge. 

Twelfth. All actions of the said Reorganization Committee 
shall be binding and effectual, notwithstanding that members 
thereof may be personally interested in or may also act as Directors 
of said National Cordage Company, or of any committee of the said 
Board of Directors, provided that no action shall be taken by the 
said Reorganization Committee which shall discriminate between 
the parties of the first part or between the parties of the second 
part to this agreement, whether they shall have become such by 
executing the same or by depositing, as aforesaid, but such action 
shall be for the equal benefit of all in the proportions of their interest, 
as defined in said plan of reorganization. 

All powers requisite or, in the opinion of the Reorganization 
Committee, desirable, to accomplish the objects of this agreement, 
are hereby conferred upon the Reorganization Committee, in addi- 
tion to those specially enumerated, including the power to add to 
its membership such person, persons, corporation or corporations, 
as it may deem advisable, who and which, when so added, shall 



84 THE NATIONAL CORDAGE COMPANY 

have the same powers as those hereby conferred upon said Reor- 
ganization Committee. 

For all the purposes herein contemplated, the action of a majority 
of the members at the time being constituting the Reorganization 
Committee, shall constitute the action of the committee, and have 
the same legal effect as the unanimous action of the committee. 

Any member of said Reorganization Committee may at any time 
resign by giving written notice to the other members. Vacancies 
so created, or created by death or otherwise, may be filled by the 
remaining members of the committee, or by two-thirds in number of 
such remaining members, by appointment in writing, such appointee 
or appointees to have the same powers and duties as the members 
of the committee herein specifically named. No member shall 
be responsible except for his own acts. 

Each and every of the parties of the first and second parts hereto 
expressly covenants and agrees each for himself, his executors, 
administrators and assigns, to and with the said Reorganization 
Committee, that he will fully and in all respects carry out and per- 
form this agreement on his or their part, and in the event of occasion 
to enforce against any parties to or depositors under this agreement, 
any of the provisions hereof, or to pursue any remedy against such 
party or depositor, the Reorganization Committee are hereby 
especially constituted Trustees and Agents of the other depositors 
and certificate holders or owners, present or future, for that pur- 
pose, and to that end all the rights and interests of all the other 
depositors and certificate holders or owners, present or future, in 
the premises, shall be and they are hereby assigned and transferred 
to and vested in the Reorganization Committee. 

Thirteenth. It is further expressly understood and agreed 
that said Reorganization Committee shall make a fair and reasonable 
effort to carry out some such plan of reorganization as that referred 
to in their suggestions hereinbefore recited, but that if for any reason 
said Reorganization Committee shall fail to carry out some such 
plan of reorganization, it is the intention of this agreement to confer 
upon said Reorganization Committee unlimited powers and absolute 
discretion to carry out or attempt to carry out any other plan of 
reorganization or any other adjustment of the affairs of this Com- 
pany, which they shall deem to be for the best interests of said 
depositors, whether or not such plan shall be the one first formulated 
by said Reorganization Committee under their said suggestions. 



REORGANIZATION AGREEMENT 85 

This agreement may be executed in as many parts as the parties 
hereto may agree upon, any one of which originals shall be equally 
with the others, evidence of the agreement of the parties hereto. 

In witness whereof, the parties of the first and second part 
have hereunto set their hands and seals and the number of shares 
respectively deposited by them hereunder, and the parties of the 
third part have hereunto set their hands and seals, and the party 
of the fourth part has caused its corporate seal to be hereunto affixed 
attested by its Secretary, and signed by its 

, the day and year first above written. 



ABSORPTION OF THE SECURITY CORPORATION 
AT TIME OF REORGANIZATION 

Whereas, the properties of the said Security Corporation are at 
present under lease to the National Cordage Company, as specified 
in an indenture of lease made the second day of November, 1891, 
between the Security Corporation, the National Cordage Company 
and the Manhattan Trust Company; and 

Whereas, since the making of said lease, the National Cordage 
Company has become insolvent, and on the fourth day of May, 1893, 
Receivers thereof were appointed by the Chancellor of New Jersey; 
and 

Whereas, the creditors and stockholders of said National Cordage 
Company thereafter appointed Messrs. George C. Magoun, Ernst 
Thalmann, and Gustav H. Gossler, a Reorganization Committee 
to devise and carry out a plan for the reorganization of the affairs 
of said National Cordage Company; and 

Whereas, it is proposed, that as a part of said reorganization, the 
business heretofore conducted by said National Cordage Company 
shall in the future be conducted by a reorganized or successor cor- 
poration; and 

Whereas, said Reorganization Committee, while fully cognizant 
of the value of the properties of the Security Corporation, have 
expressed their unwillingness to recommend to such reorganized 
or successor corporation the assumption of said existing lease or 
the making of a new lease upon the same terms, stating that they 
consider the yearly payments, and particularly the sinking fund 
payments, under the present lease, too burdensome and creating 
too large a fixed charge upon such reorganized or successor corpora- 
tion; 

But, Whereas, said Reorganization Committee have expressed 
their willingness to recommend to such reorganized or successor 
corporation, the creation and issue of its six per cent, guaranteed 
stock to an amount not exceeding six million dollars, to be redeem- 
able at any time at the option of the company, at 105, on which 
guaranteed stock a fixed yearly dividend of six per centum per 

86 



ABSORPTION OF SECURITY ORGANIZATION 87 

annum, payable quarterly, shall be paid by said corporation, out 
of the profits of the business of said corporation, before any dividends 
shall be set apart or paid upon any other stock of said company, 
but which guaranteed stock shall be entitled to no other or further 
dividend; the holders of such guaranteed stock to have priority 
in case of liquidation over the holders of the preferred stock of said 
corporation; such guaranteed stock to be issued for the purchase 
of said bonds or some part thereof, or of said leased property or of 
some part thereof, or of other property, so as ultimately to be ex- 
changed for said security bonds, at par, said bonds, after such 
exchange, to be cancelled if all of said bonds shall be so exchanged, 
or if not all, or substantially all so exchanged, to be held, sold, 
transferred, or otherwise disposed of, subject to the order of said 
Reorganization Committee, and as it shall deem to be for the best 
interests of said reorganized or successor corporation, for the purpose, 
among other things, of ultimately acquiring title to said mortgaged 
property, all obligations of said Committee to said depositors 
being in all respects fulfilled by the delivery of said shares to said 
depositors. 

Now, Therefore, we, the undersigned, owners or holders, or both, 
of the first mortgage consolidated gold bonds of the Security Cor- 
poration to the amounts set opposite our respective signatures 
hereto, which bonds are secured to be paid by an indenture of mort- 
gage dated the second day of November, 1891, between said Security 
Corporation and the Manhattan Trust Company of the City of 
New York, hereby severally consent and agree with the other signers 
hereof, and with said Reorganization Committee, and with the 
National Cordage Company, and with said reorganized or successor 
corporation, each in consideration of the consent and agreement 
of the other signers hereof, and of one dollar to each of us in hand 
paid by the others of said signers, and of other valuable considera- 
tions : 

I. That all of the bonds so held or owned by us and each of us 
shall, upon the demand of said Reorganization Committee, be 
deposited with the Manhattan Trust Company, in trust, in exchange 
for suitable receipts entitling the holder thereof to receive an amount 
of said guaranteed shares at par, when said shares shall have been 
received by said Trust Company, equal to the par value of the bonds 
so deposited, and said bonds are hereby transferred to the said 
Reorganization Committee, in trust, for the purposes herein ex- 



88 THE NATIONAL CORDAGE COMPANY 

pressed, and we, the signers hereof, hereby severally make, constitute, 
and appoint said Committee, or any two of them, or their successors, 
our and each of our true and lawful attorneys, for us and each of us, 
and in our respective names, places, and stead, and until the first 
day of January, 1894, to exercise all the powers and control con- 
ferred upon bondholders by said mortgage and by said lease, or 
by either, either in requesting, notifying, or directing the trustee 
of said mortgaged property, or otherwise, in all respects with like 
effect as if we were personally acting. 

II. Upon the receipt of said shares of guaranteed stock by said 
Manhattan Trust Company to be so exchanged, said Reorganization 
Committee is hereby authorized and empowered as the agents 
and attorneys-in-fact of the signers hereof and of each of them, 
to assent to and arrange for the cancellation, modification, or any 
other disposition of said lease from said Security Corporation to 
said National Cordage Company, and of the said mortgage so made 
to secure said bonds; to cause the said bonds so deposited to be 
cancelled, and the mortgage securing the same to be satisfied of 
record; to agree with said Security Corporation for the conveyance 
and transfer by it, free from the lien of said mortgage, of all or any 
part of the property covered thereby, including the good-will, to 
said National Cordage Company, or to said reorganized or successor 
corporation, in consideration of the cancellation of said bonds, 
the issue of said stock, or for such other consideration as said Com- 
mittee may think proper; or, in case the whole of said issue of bonds 
shall not be deposited, to hold, sell, or otherwise dispose of, so many 
of said bonds as shall be so deposited, and to make such arrange- 
ments concerning the cancellation, modification, or other disposition 
of said lease and said mortgage, or either of them, as they may deem 
best. And said Reorganization Committee is hereby further au- 
thorized and empowered to take such steps, enter into such contracts, 
and do such things as may in their judgment be necessary or proper 
for carrying out the arrangement proposed by them and hereinbefore 
recited, whether by taking the action hereinbefore specified, or 
otherwise, as they may deem proper; provided, however, that 
before taking any steps which shall deprive the signers hereof of 
their ownership of said bonds, or which shall alter or cancel the 
lien of the mortgage securing the same, the Manhattan Trust Com- 
pany shall have received said shares of guaranteed stock for delivery 
in exchange for said bonds as hereinbefore recited, and said reor- 



ABSORPTION OF SECURITY ORGANIZATION 89 

ganized or successor corporation, in said certificates of stock, or 
otherwise, by suitable contract, shall have agreed that no mortgage 
or other lien prior or superior to the lien of such guaranteed stock 
shall hereafter be created upon the Mills or plant of said reorganized 
or successor corporation by it or with its consent (except, first, 
to provide for existing liens on said properties, and, second, to 
secure the Bonds proposed to be issued as a part of the pending 
reorganization, the amount of which bonded issue is not yet fully 
determined, but which is not to exceed $7,500,000), without the 
consent of the holders of 80 per cent, in value of said guaranteed 
stock, and of the preferred stock of said reorganized or successor 
corporation. It is the intention of this instrument to confer upon 
said Committee full and absolute powers to cancel, modify, or 
otherwise dispose of said indenture of mortgage and lease, and of 
the property of every sort covered thereby in such manner and to 
such extent as they shall deem to be for the best interests of said 
National Cordage Company, or of said reorganized or successor 
corporation, provided, that said shares of stock are delivered to the 
signers hereof as herein provided. Delivery to the Manhattan 
Trust Company subject to the order of the signers hereof, shall 
constitute an effective delivery of said shares within the meaning 
hereof. 

For all the purposes herein contemplated, the action of a majority 
of the members for the time being constituting said Reorganiza- 
tion Committee, as provided in the Reorganization Agreement 
of June 19th, 1893, shall constitute the action of the Commit- 
tee, and have the same legal effect as the unanimous action of the 
Committee. 

III. This agreement shall become binding upon the signers 
hereof as soon as the owners or holders of two million five hundred 
thousand dollars, par value, of said bonds, now outstanding, shall 
have signed the same, and shall continue binding upon the signers 
hereof, until and including the first day of January, 1894. If the 
arrangement above outlined shall not have been carried out prior 
to that date, or if this agreement, shall not have been signed prior 
to November 1st, 1893, by the owners or holders of at least two 
million five hundred thousand dollars, par value, of said bonds, 
then, and in either of said events, said bonds shall thereupon be 
returned to the depositors, and this agreement shall thereupon 
cease, determine, and become null and void. 



9Q 



THE NATIONAL CORDAGE COMPANY 



In Witness Whereof, we have hereunto set our hands, this, 
day of October, 1893. 



APPRAISERS' REPORT PREPARED IN CONNECTION 
WITH SECOND REORGANIZATION CIRCULAR 

New York, November 13th, 1893. 
We have been requested to appraise the value of the business 
of the mills which will be owned and controlled by the United States 
Cordage Company. In arriving at our conclusions, we have assumed 
three things, viz. : 

1. That the business of the United States Cordage Company 
will be conducted under one central competent management. 

2. That its various mills will continue to control the trade which 
they have controlled in the past. 

3. That the United States Cordage Company will have sufficient 
working capital. 

The total number of spindles in the mills which will be owned 
or controlled by the United States Cordage Company will be 6,104, 
or, if the Elizabethport mill is rebuilt, about 7,000. 

This represents from 66% to 70% of the manufacturing capacity 
of all the cordage mills in the United States. 

The consumption of cordage in the United States has increased 
for the past nine years at the rate of 15% per annum. 

We estimate that this consumption will continue to increase 
during the next five years at the rate of at least 10% per annum. 

We omit from consideration the value of the physical property, 
and also any increased value to the good-will of the business, result- 
ing from the consolidation of the twenty mills under one manage- 
ment. We do, however, consider the ecomonies resulting from this 
consolidation. 

We base our conclusions on the above statements, supplemented 
by the knowledge which we have acquired from many years' expe- 
rience in the cordage business. 

We have reached the conclusion that the fair, practicable way to 
ascertain the value of the good- will or earning capacity of the business 
of the United States Cordage Company upon the above basis is 
to adopt the standard commonly accepted in the trade, and to 
use the spindles as the unit of value. We think that a conservative 

91 



92 THE NATIONAL CORDAGE COMPANY 

valuation of each spindle, for this purpose, is $4,000. We multiply 
this figure by 6,104, or by 7,000, as the case may be, the number 
of spindles, which makes our appraised value of the good-will of the 
business of the United States Cordage Company from $24,416,000 
to $28,000,000. 

E. M. Fulton, 
Wm. Marshall, 
Wm. B. Sewall. 



New York, November 20th, 1893. 
CIRCULAR No. 2 

OF THE 

REORGANIZATION COMMITTEE OF THE NATIONAL 
CORDAGE COMPANY 

TO STOCKHOLDERS 



Reorganization Committee has much pleasure in stating that, 
although the affairs of the National Cordage Company are not 
in as good condition for immediate liquidation as they appeared 
to be on June 21st, (the date of the Committee's Circular No. 1), 
yet the effect of the proposed reorganization will be to greatly im- 
prove the status and intrinsic value of the property of the reorganized 
Cordage Company, thus rendering more secure and extended the 
basis upon which the reorganized Company's securities will be 
predicated. 

Many leases and contracts deemed unprofitable have been abro- 
gated. The reorganized Company's contract relations will be 
simplified. The accounts have been analyzed and adjusted, and 
the absolute title has been acquired, or will be acquired, to many 
valuable mills and properties, a part of which have been heretofore 
held under lease, and over a part of which the Company has hereto- 
fore had no control. 

These important additions to the Company's property will be 
made without expense either to the National Cordage Company 
or to the reorganized Company through which it is proposed to 
hereafter conduct the business. 

Not only have these additional properties been acquired without 
expense, but also by their acquisition the indebtedness of the reor- 
ganized Company and its annual fixed charges will be much less 
than if the properties should be taken over subject to the leases 
and burdens which will thus have been done away with. 

Among other additional properties to be thus acquired are the 
eight mills heretofore owned by the Security Corporation, referred 



94 THE NATIONAL CORDAGE COMPANY 

to in Circular No. i. These mills represent two-fifths of all the 
spindles heretofore controlled by the National Cordage Company, 
and consist of 

The Boston Cordage Mill, The Chicago Cordage Mill, 

The Standard Cordage Mill, The Lawrence Rope Works, 

The New Bedford Cordage Mill, The Field Cordage Mill, 

The Middletown Cordage Mill, The Ohio Cordage Mill. 

These properties have been heretofore held by the National 
Cordage Company under a twenty-years' lease, expiring in ion. 
This lease required the payment, as rental, by the National Cordage 
Company of $585,000 per annum, besides assessments, taxes, charges, 
water rents, expenses of operation and maintenance and insurance. 
Of this rental, $225,000 per annum was payable into a sinking 
fund, for the redemption and payment of Security Corporation 
bonds. Thus during the twenty-years' term of the lease, the Na- 
tional Cordage Company was under obligation to pay to the Security 
Corporation sums which, with interest in the meantime, amounted 
to over $6,000,000. As the Committee regarded the annual pay- 
ments called for by this lease too burdensome for the reorganized 
Cordage Company, it declined to recommend the assumption or 
renewal of this lease. As the result of many weeks' negotiations, 
the Committee has now arranged, subject to the approval of the 
holders of Security Corporation bonds (a large majority of whom 
have already given their approval), to purchase this property for 
the reorganized company, freed from the $6,000,000 mortgage 
now upon it, and subject only to certain underlying liens, amounting 
altogether to about $1,385,000, payment of which will be provided 
for by the reorganization plan. This property is to be paid for 
by the use of $6,000,000 par value of the Guaranteed Stock of the 
reorganized company, thus ridding it of over $6,000,000 of debt, 
which it would have assumed if it had renewed the lease, and of 
the annual fixed charge of upwards of $585,000, and vesting it with 
the absolute ownership of these mills. This transaction is, therefore, 
a most advantageous one for the company and for the stockholders. 

Moreover, as stated in the circular to creditors, it is expected 
that the reorganized Company will acquire title to all the Union 
Mills, consisting of the Sewall & Day, Chelsea, Donnell, Galveston, 
Hanover and Miamisburg Mills, which will materially add to the 
value of the Company's mill properties. 



REORGANIZATION CIRCULAR, STOCKHOLDERS 95 
The reorganized Company will be called 

United States Cordage Company. 

The new Bonds will contain a provision for a sinking fund of $100,000 
per annum after 1895, and it is proposed that a like sum shall be 
annually set apart, out of profits only, and before payment of any 
dividend on the Common Stock, for the redemption of the Guaran- 
teed Stock, so that, in time, both Bonds and Guaranteed Stock 
may be retired. 

For the information of the stockholders, the Committee's Circular 
No. 2, to creditors, showing the final plan of reorganization, is here- 
with enclosed. The success of the reorganization depends upon the 
creditors' assent to the proposition therein set out. 

The Committee also reminds the stockholders that in addition 
to its equity in the mills, plants and machinery, and in addition 
to the new property of other kinds, the reorganized company will 
have, as working capital, not only the contributions of the stock- 
holders, but also all the assets of the National Cordage Company 
remaining after the payment of its debts. 

Stockholders may be disappointed with the appraisals put by 
the New Jersey Receivers upon the mills, plants and machinery 
inventoried by them. It must be borne in mind, however, that 
these items in the inventory did not include the mills, plants and 
machinery of either the Security or the Union Mills. Besides this, 
the Receivers' appraisement was made upon the basis of a forced 
sale of dead real estate, bricks, mortar, wood and machinery. In 
their inventory the Receivers say about this: 

" So far as the mills, plant and machinery are concerned, there are various 
" bases of appraisement. 

" From the point of view of a solvent corporate owner, they would be ap- 
" praised as an entirety, as the going, useful, profit-earning property of a going 
" concern. 

" From the point of view of a creditor of the Company, they may be ap- 
" praised on one of three bases: 

" First, upon the theory that a purchaser could be found willing and able 
" to purchase the whole property, at an adequate price, with a view of contin- 
" uing to operate it in the cordage business. 

" Second, upon the theory that there is no purchaser, at an adequate price, 
" for the whole of the property, but that separate purchasers can be found for 
" the several mills, who will each buy those mills with a view of continuing 
" the cordage business theretofore carried on at those mills. 



96 THE NATIONAL CORDAGE COMPANY 

" Third, upon the theory that the mills must be sold separately, at forced 
" sale, upon a given date, without regard to the future use to be made of them. 

" The Receivers are of the opinion that no purchaser for these properties 
" can be found upon the first of the above theories, unless such purchase should 
" be made as a part of the voluntary reorganization of the Company by the 
" creditors and stockholders. They, therefore, do not feel called upon to ex- 
" press any opinion as to the probable value of the mills, plant and machinery 
" upon this theory. 

" The Receivers are also of the opinion that there are not a sufficient number 
" of persons familiar with or desiring to engage in the cordage business to 
" justify them in expecting to effect a sale upon the second of the above theo- 
" ries. They, therefore, do not regard it as a part of their duty to express an 
" opinion as to the probable value of the mills, plants and machinery upon 
" this theory. 

" Therefore, in arriving at the appraisals shown in the following inventory, 
" the Receivers have acted solely upon the third theory above mentioned. 
" Their appraisals are based solely upon what they have reason to believe 
" would be the actual cost of purchasing the ground upon which the mills stand 
" and of erecting and equipping those mills, less a proper deduction for depre- 
" ciation. This appraisal is based upon the assumption that approximately 
" these prices could be obtained upon a forced sale of these properties, in sepa- 
" rate parcels, on a given date, and without regard to the fact that they have 
" together formed one entire manufacturing property. 

" While the Receivers are of the opinion that the amount of such an appraisal 
" would be very largely increased if based upon either of the first or second of 
" the theories above mentioned, and while they are also of the opinion that the 
" good-will of the business represented by these combined mills, if owned by a 
" solvent, properly managed corporation, would be a very great one, yet as 
" neither of these increments of value forms a part of the appraisal which they 
" understand it to be their duty to make, they express no opinion as to the 
" amount by which their appraisals would be increased if these things were 
" taken into consideration." 

If the Security and Union Mills should be appraised upon the 
same basis as the above, the entire mill property and good-will 
would, in the judgment of the Committee, furnish ample security 
for the proposed new bonds. 

The Committee does not think, however, that this is a proper 
basis of appraisement from the stockholders' point of view. As 
none of its members are practical cordage men, the Committee 
does not undertake to express an opinion concerning the real value 
of the properties and good-will of the business of the reorganized 
Company. It is of opinion, however, that in ascertaining such value,, 
the facts should be considered that these properties will be prop- 
erties of a going concern, and that they will be united and operated 
under a single management. 



REORGANIZATION CIRCULAR, STOCKHOLDERS 97 

At the request of some of the larger stockholders, the Committee 
encloses with this an appraisal which has been made for these stock- 
holders. 

The mill properties, which will be owned or controlled by the 
United States Cordage Company, are: 

L. Waterbury & Co., Chicago Cordage Company (formerly 

William Wall's Sons, Wm. Deering & Co.), 

Tucker & Carter Cordage Company, American Cordage Company (formerly 

Victoria Cordage Company, Field Cordage Company), 

Xenia Twine & Cordage Company, Ohio Twine & Cordage Company, 

J. Rinek's Sons, Sewell & Day Cordage Company, 

Lawrence Rope Works, Chelsea (formerly Suffolk) Cordage 

Boston Cordage Company, Company, 

Standard Cordage Company, Donnell Cordage Company, 

New Bedford Cordage Company, Galveston Rope and Twine Company, 

Mdjdletown Twine Company, Hanover Cordage Co., Ltd., 

Miamisburg Cordage Company, Elizabethport Cordage Co., 

Miamisburg Binder Twine & Cordage 
Company. 

Besides the foregoing, there will be various dismantled and dor- 
mant mill properties purchased by the National Cordage Company, 
in order to acquire their business. 

It is a noticeable fact that the creditors and stockholders of the 
company, have cordially and harmoniously united with the Com- 
mittee in the proposed reorganization, and that no attempt has been 
made, by litigation or otherwise, to impede the reorganization, and 
(taking into consideration the embarrassing complications which 
have been dealt with) the Committee congratulates the stock- 
holders upon what promises to be a satisfactory adjustment of their 
interests. 

The Committee therefore expects to complete the reorganization 
by the organization of the United States Cordage Company within 
the present year. 

The new Board of Directors of the United States Cordage Com- 
pany has been partially selected. Among them will be the members 
of the Advisory Committee, Messrs. George G. Williams, George 
S. Coe and W. W. Sherman, who, at the special request of the 
Reorganization Committee, have consented to serve for the first 
year as the representatives of creditors and bondholders. Among 
them also will be Mr. E. F. C. Young, one of the Receivers, and the 



98 THE NATIONAL CORDAGE COMPANY 

members of the Reorganization Committee. The Board will consist 
of not more than fifteen members. 

George C. Magoun, \ . 

^ ^ I Reorganization 

Ernst Thalmann, > _ .., 

„ tt /-. Committee. 

GUSTAV H. GOSSLER, I 



New York, November 20th, 1893. 
CIRCULAR No. 2 

OF THE 

REORGANIZATION COMMITTEE OF THE NATIONAL 
CORDAGE COMPANY 

TO CREDITORS 



Proposed Modified plan of Settlement with 
Creditors, 

Involving the sale or transfer of all the Assets of the National 

Cordage Company, and their application, in the first 

instance, to the payment of its debts. 

This also involves the purchase by the Reorganized Company 

of the Eight Security Mills, the Cancellation of the existing 

$6,000,000 Mortgage on these Mills, and the 

issuance of stock in lieu of the Bonds 

secured thereby. 

THE REORGANIZED COMPANY WILL BE CALLED 

UNITED STATES CORDAGE COMPANY 



Proposed Settlement with Unsecured Creditors 

Pay 25 per cent, of the unsecured debt in cash by January 31st, 1894. 
This will exhaust the unpledged merchandise and cash assets, 
leaving Accounts Receivable, and other items to be disposed 
of as below : — 

Pay 65 per cent, of the unsecured debt by January 31st, 1894, 
in bonds at par of the United States Cordage Company (which 
shall be part of an authorized issue of $7,500,000 30-year six 
per cent, gold bonds), secured by a mortgage on all the mills 
and realty, plant, machinery, good- will, trade-marks, brands 
and patents, acquired and to be acquired, also by pledge of 
all stocks of other Cordage companies owned by the United 
States Cordage Company. These bonds will be dated January 
1st, 1894. 



IOO THE NATIONAL CORDAGE COMPANY 

Pay 10 per cent. ($875,581) of the face of the total unsecured debt, 
and interest on the total unsecured debt, in Trust Liquidation 
Certificates, secured by a pledge of all the Accounts Receivable 
and other personal assets of the National Cordage Company 
remaining after providing for the 25 per cent, payment in cash, 
and the expenses of receivership and reorganization. 
These pledged Assets will be liquidated as rapidly as possible. 

The Trust Liquidation Certificates will entitle the holder to his 

pro rata share of the proceeds of these pledged Assets to an amount 

not exceeding this 10% and interest. 

These pledged Accounts Receivable and other personal assets 

are classified by the Committee, as follows: 

Slow, but considered good $1,111,762 

Slow and doubtful, of the face value of $1,851,076, 

but probably good for 600,000 

$1,711,762 

Secured Creditors 

The Committee has arranged with a majority in value of the 
secured creditors, and expects to arrange with all secured creditors, 
for the gradual liquidation of their merchandise collateral, through 
the United States Cordage Company at prices to be agreed upon, 
and the acceptance of payment for their deficiency, if any, in these 
Trust Liquidation Certificates. 



We recommend the prompt acceptance of the above proposition. 
It is the best settlement of which the condition of the company 
permits. 

George C. Magoun, 
Ernst Thalmann, 
gustav h. gossler, 

Reorganization Committee. 



To the Creditors of the National Cordage Company: 

The Reorganization Committee has submitted to us in detail 
a statement of the condition and affairs of the National Cordage 
Company which we have examined with care. We fully concur 
in the conclusions reached by the Reorganization Committee, as 
stated in its Circular No. 2, and we recommend to all creditors 
the immediate acceptance of the plan of settlement proposed. It 



REORGANIZATION CIRCULAR, CREDITORS IOI 

is our opinion that this adjustment is not only most equitable and 
fair to all concerned, but also that it is the best that can be made 
under the circumstances. 

George G. Williams, President Chemical National Bank. 
George S. Coe, President American Exchange National Bank. 
W. W. Sherman, President National Bank of Commerce. 

Advisory Committee. 

To the Creditors of the National Cordage Company: 

As Receivers of this Company, we hereby concur in the recom- 
mendation for the adjustment of all liabilities of the National Cord- 
age Company, as proposed by the Reorganization Committee. 
In recommending the immediate and unanimous approval and ac- 
ceptance of the settlement proposed, we do so in the interest of the 
creditors at large, and believing that in no other way they could 
expect to obtain as favorable a liquidation of their claims, as the 
liabilities of the Company, and its varied interests, are too large 
to be adjusted favorably through any other procedure than through 
the proposed reorganization and adjustment. 

E. F. C. Young, 
G. Weaver Loper, 

Receivers. 

Various changes in the very complicated affairs of the National 
Cordage Company which have taken place since June 21st, 1893 
(the date of our Circular No. 1), will prevent the Receivers and the 
Reorganization Committee from carrying out the settlement then 
proposed. A new form of settlement is necessary, which, however, 
is believed to be a better settlement for the body of creditors than 
the one originally proposed. 

The settlement now proposed means the application of all the 
assets of every sort, in the first instance, to the payment of debts. 

This change in the form of settlement has become necessary for 
the following reasons: 

The time for proving claims before the Receivers expired on 
August 31st, 1893, and on that date and since a number of claims 
were filed, including claims for breach of various contracts, such as 
leases, manufacturing, employment, sales, etc., not appearing on the 
books as liabilities, which swelled the demands against the Company 
to a sum considerably larger than had been anticipated. 



102 THE NATIONAL CORDAGE COMPANY 

Moreover, a large number of debts, upon which the Company 
was only contingently liable as endorser, and which, therefore, 
did not appear in the accounts as liabilities, and which were not 
expected to become liabilities, have become actual liabilities by the 
failure and default of the principal debtors. 

A large shrinkage in both pledged and unpledged merchandise 
and other assets has also occurred through the unprecedented decline 
in the prices of fibers, rope and twine, and this loss was made still 
greater by the fact that, after the Receivers took possession, orders 
for twine, previously given to the Company, were cancelled to the 
extent of many thousand tons. 

The financial depression also caused failures among the Com- 
pany's customers, which rendered numerous accounts slow, doubtful 
or bad, which on June 21st, were considered good and quick assets. 

These facts and the maturing of certain underlying liens on various 
mill properties, have increased the total debt by the sum of $1,609,- 
374, and made it too large to be paid in bonds at 80, as originally 
proposed. For this reason no allotment has been made, and no 
liability has been incurred under the underwriting agreements 
by the signers thereof. 

The underlying liens on the various properties are $1,385,000 on 
the Security Mills (now proposed to be purchased), and $728,000 
on the Union Mills, in addition to interest on both items. About 
$456,000 of this sum must be paid this year, and is treated as a 
part of the present debt. To provide for these Security liens, 
among other things, the authorized issue of bonds must be increased 
from $6,000,000 to $7,500,000. There is also a mortgage of $250,- 
000 upon another of the Company's mills which was contracted 
to be conveyed to it free of incumbrance, which amount the Receivers 
claim from the vendors of the property. 

On October 27th, 1893, the Receivers filed a detailed inventory, 
taken as of the date of June 30th, 1893, being their first inventory. 
This shows assets appraised by them at $12,601,561, and liabilities 
as of June 30th, 1893, of $11,650,617, and contingent liabilities 
of $1,039,826. 

On September 30th, 1893, another inventory was made, and a 
statement of assets and liabilities as of that date has been made up 
by Mr. Seaward, Accountant of the Receivers. 

Until after the completion of this inventory of September 30th, 
1893, and until after an examination of the claims filed against the 



REORGANIZATION CIRCULAR, CREDITORS 103 

Receivers and of the Receivers' appraisements shown by their inven- 
tory filed on October 27th, 1893, it was impracticable for the Reorgani- 
zation Committee to formulate a new proposition for settlement. 

In the meantime, however, the Committee has used every effort 
to complete a plan of reorganization, the success of which depends 
upon a voluntary settlement by the creditors, but which will put the 
reorganized company in possession of property and business of much 
greater value than that of the present company before its failure. 

While the changes above referred to have seriously diminished 
the proportion of quick assets to unsecured liabilities and have 
therefore correspondingly diminished the present paying capacity 
of the assets, nevertheless, the slow assets remain, and can be utilized 
in time and with judgment to the advantage of creditors, while 
the mills, plants, machinery and good-will of the reorganized com- 
pany can be made available as valuable security for the bonds 
offered in settlement. 

Mr. John Scott, on behalf of the Committee, has carefully examined 
the work of the Accountant above referred to, as well as the claims 
filed and the allowances which the Committee thinks will be made, 
and advises the Committee, that, subject to future proof of claims 
not now known or anticipated, and subject to possible variations 
resulting from the Receivers' allowance or disallowance of claims 
proved, the following figures are correct, as of September 30th, 1893: 

ASSETS 

Real estate, mills, plant and machinery (not in- 
cluding good- will, trademarks, etc), in New 
Jersey Receivers' possession and appraised by 

them at $2,934,388 

Stocks of other Cordage Companies, in Receivers' 

possession, and appraised by them at 679,300 

Merchandise 4,880,884 

Notes Receivable 273,303 

Accounts Receivable 3,596,691 

Mill Supplies 60,000 

Security Corporation bonds 303,624 

Cash 326,169 

Claims against various parties 595,463 $13,649,822 

Less pledged assets 4,839,978 

Free Assets 8,809,844 

1 This includes the assets expected to be received from the Boston Receivers 
as part of the reorganization. 



104 THE NATIONAL CORDAGE COMPANY 

LIABILITIES 

Debts as per books $12,251,792 

Claims filed, subject to adjustment and allow- 
ance, estimated $500,000 

Liens due this year 456,000 

Contingencies and expenses, estimated 388,000 1,344,000 
Total debt $13,595,792 

Value of Collateral pledged, as of September 30th, 

1893, to be applied in payment of secured debt . 4,839,978 

Unsecured debt 8,755,814 

Apparent surplus $54,030 

The pledged assets ($4,839,978) include certain accounts and notes 
receivable, Security bonds, and also certain merchandise, the latter 
being of the appraised value of $4,100,489. 

For the purpose of raising the cash necessary to pay the 25 per 
cent, offered, in addition to the cash in hand, there is available 
free merchandise amounting to $780,395, and the unpledged accounts 
and notes receivable, and the mill supplies. 

In this way all the free assets, except those representing the mill 
properties and good- will, will be applied to the payment of 35 
per cent, of the face of the unsecured debt and interest, and the 
pledged assets will be applied to the payment of the secured debt. 
The remaining assets, representing the mill properties and good-will, 
and also the new mill properties to be acquired, will be mortgaged 
to secure the payment of the bonds mainly used in paying the remain- 
ing 65 per cent, of the unsecured debt. 

Thus the entire assets of the company will be utilized in the pay- 
ment of its debts. 

The above assets, amounting to $13,649,822, are not all available 
for immediate liquidation of debts, because they cannot now be converted 
into cash at adequate prices. For instance, among them are slow 
and doubtful assets of the face value of $2,962,838, which cannot be 
considered for purposes of present payment, but which are believed 
to be ultimately good for $1,711,762. Nor can the item of mills, plant, 
machinery, &"c, amounting to $2,934,388, nor the item of stocks of 
other mills, amounting to $679,300, be advantageously turned into cash 
for the purposes of immediate liquidation. Nor can it be ascertained, 
at present, how much can be collected of the item of claims against 
various parties, amounting to $595,463. 



REORGANIZATION CIRCULAR, CREDITORS 105 

In short, $6,566,860 of the unsecured debt, and the interest, 
must be provided for by bonds and Trust Liquidation Certificates, 
and provision must also be made for $1,657,000 of underlying liens 
on various properties, which mature at various times during the 
ensuing ten years, and which are not included in the above item 
of total debt, 

If an attempt should be made to pay the present debt at the present 
time, at forced sale, out of the present assets, it is obvious that credi- 
tors could not be paid in full, and a forced sale would so materially 
reduce the above appraised value of the assets as to pay an unsatis- 
factory dividend to creditors. 

The market price of good-will, at a forced sale of a dismembered 
property, is so problematical that it is not appraised. 

The Security Mills 

The eight mills of the Security Corporation have heretofore 
been operated under a lease, which required the yearly payment 
for twenty years by the National Cordage Company to the Security 
Corporation of $585,000 annual rental. The payments, if continued, 
would retire the Security Corporation bonds of $6,000,000, with 
interest, at the end of the lease. 

Although these mills formed an important part of the Cordage 
Company's operated plant, it was obvious that the terms of the lease 
were too burdensome for the reorganized Company. The Committee 
has therefore completed arrangements for a conveyance of the title 
of the Security Mills to the reorganized Company, subject to the 
approval of the holders of the bonds of the Security Corporation. A 
large majority, in value, of these bondholders have already assented 
to this conveyance, which, when made, will be free from the lien 
of the mortgage of the Security Corporation of $6,000,000, and will 
be subject only to underlying liens in the nature of purchase money 
mortgages amounting altogether to $1,385,000, payment of which 
will be provided for by the reorganization. It is confidently ex- 
pected that the necessary consent will be obtained from all the holders 
of Security Corporation bonds. 

In giving this consent, however, the holders of the Security Cor- 
poration bonds have expressly stipulated that bonds of the reorganized 
company should not be issued to creditors at less than par, and that 
the whole issue should not exceed $7,500,000. 



106 TEE NATIONAL CORDAGE COMPANY 

This agreement, if consummated, will place the eight Security 
Mills (the Boston, Standard, New Bedford, Lawrence, Middletown, 
Chicago, Ohio and American) under the mortgage made to secure 
the bonds of the reorganized Cordage Company, and when the Union 
Mills are acquired, will make it a mortgage upon twenty-two mills 
(instead of upon twelve, as originally proposed). It will reduce 
the fixed annual charges by the sum of $585,000, and will relieve 
the reorganized Cordage Company from burdensome restrictions con- 
tained in the Security lease and mortgage, and so permit of greater 
economy in managing and operating the mills. 

By the provision made in the reorganization for underlying liens 
it is also expected that the reorganized Company will acquire title 
to the Union Mills, ownership in a part of which has been heretofore 
represented by capital stocks of corporations owning these proper- 
ties. The remaining portion of these capital stocks is now pledged 
to secure payment of the underlying liens on these properties. 

The stockholders of the National Cordage Company have, with 
practical unanimity, submitted to an assessment on their stock 
($20 on each preferred share, and $10 on each common share), 
and have paid in their contributions for working capital for the new 
company. The amount already paid in cash is in excess of $2,700,000 
and this is expected to be increased to nearly $3,000,000. 

This fund, while not available for the payment of debts of the 
old company, will be in the treasury of the new company and will 
greatly strengthen its resources and credit and supply it with working 
capital. 

The Committee also calls attention to the fact that in addition 
to the new real property of value which will be acquired for the new 
company, several burdensome contracts of various kinds will be 
abrogated or modified, the accounts and system of business will be 
much simplified, the expenses will be much reduced, all of which 
will also add to the value of the bonds of the reorganized company. 

These facts render the bonds, now proposed to be issued, so much 
more valuable than the bonds originally proposed, that they should 
be available at par for the payment of debts. 

The only alternative to this proposition is the dismemberment 
of the properties and their sale in judicial proceedings, which would 
produce most unsatisfactory results. 

The Reorganization Committee therefore most respectfully urges 
all creditors to assent to the plan herein proposed before December 



REORGANIZATION CIRCULAR, CREDITORS 107 

1st, 1893, and requests the creditors to sign and forward the enclosed 
assent as soon as possible. 

The Committee intends to proceed with this reorganization 
on or about December 1st, 1893, by the organization of a new 
company to carry on the former business of the National Cordage 
Company. 

This Company will be called the United States Cordage Company. 

In what it has heretofore said the Committee has treated the 
situation as it must be viewed by a creditor desiring prompt settle- 
ment. 

The valuations which it has been obliged to adopt for this purpose 
are radically different from the valuations which would be put 
upon the same properties as properties of a going concern, owned 
and operated by a solvent corporation; and, in particular, they 
represent, on the basis here adopted, much less value than will 
be represented by the enlarged, increased, and harmoniously con- 
solidated properties expected to be obtained for the reorganized 
Cordage Company, as will appear from the Committee's Circular 
No. 2, to stockholders, enclosed with this. 

The Committee recommends the acceptance of the settlement herein 
proposed. It is the best settlement of which the condition of the company 
permits. In saying this, it reminds you that its members are them- 
selves creditors, and also the agents of other creditors, and that the 
Advisory Committee of Bank Presidents, whose recommendation is 
hereto attached, were appointed to represent all creditor banks. 

George C. Magoun,) _, . M . 

^ _ I Reorganization 

Ernst Thalmann, > _ ... 

~ xt ^ I Committee. 

GUSTAV H. GOSSLER, J 



UNSECURED CREDITOR'S ASSENT 

To Messrs. George C. Magoun, 
Ernst Thalmann, 
gustav h. gossler, 

Reorganization Committee of the National Cordage Company. 

The undersigned accepts the proposition of settlement set forth 
in your circular No. 2, dated November 20th, 1893, and hereby 
assigns to you the entire claim of the undersigned against the Na- 
tional Cordage Company, which amounts to $ , 

with interest from , in consideration 

of value received and of your undertaking as a Committee, as ex- 
pressed in said circular No. 2, to complete the above-mentioned 
settlement so far as the undersigned is concerned, and of your 
agreement evidenced by your acceptance of this assent, that in case 
you fail to so complete it, you will reassign said claims to the under- 
signed on or before February 1st, 1894. 

For like considerations, the undersigned hereby appoints and 
fully authorizes you, or a majority of the said Reorganization Com- 
mittee, as the agents and attorneys of the undersigned, to bid upon 
any sale of the assets, or any part thereof, of the National Cordage 
Company, on behalf of the undersigned, any sum not exceeding 
the above-stated indebtedness and interest, and to pay the sum 
so bid on behalf of the undersigned by a satisfaction and release of 
said claim of the undersigned against the National Cordage Company 
and its Receivers, without, however, releasing the parties other 
than the National Cordage Company, if any, who have agreed to 
pay or guaranteed the payment of the above-mentioned debt, or 
any part thereof. 

And for like considerations, the undersigned further agrees with 
you that forthwith upon receipt of the cash, bonds and Trust Liquida- 
tion Certificates, to be paid in pursuance of the foregoing settlement, 
the undersigned will transfer the title of all promissory notes, or 
other evidences of said indebtedness held by the undersigned, and 
will deliver the same to you without releasing or discharging any 

108 



UNSECURED CREDITOR'S ASSENT 109 

of the parties whose names appear upon said promissory notes, 
except so far as you shall have released or discharged the National 
Cordage Company under the authority above set forth, and that, 
in the meantime, no other disposition shall be made of said promissory 
notes or other evidences of said indebtedness. 



TESTIMONY COVERING THE CORDAGE CONSOLIDA- 
TION TAKEN BEFORE THE INDUSTRIAL 
COMMISSION 1 

Washington, D. C, April 10, 1901. 

Testimony of Mr. H. W. Grimwood 

Acting Secretary of the Cordage Association 

[112] The commission met at 10.45 A - M -> Vice-Chairman Phillips 
presiding. 

Mr. H. W. Grimwood, of New York City, acting secretary of the 
Cordage Association, was introduced as a witness and, being duly 
sworn, testified as follows: 

Q. (By Mr. Jenks.) Will you kindly give your address, Mr. 
Grimwood ? — A. 46 South street, New York. 

Q. You are at the present time acting as secretary of the Cordage 
Association ? — A . Under the nominal secretary. I am the acting 
secretary. 

Q. Who is the nominal secretary ? — A. Mr. W. P. Whitlock. 
I call him the nominal secretary because he is not active. 

Q. Have you been engaged in the cordage business for some 
time ? — A. I have been. Some years ago I was closely engaged 
in it, but dropped it several years ago. I have been in the line 
of the business all the time, but not actively engaged in the last 
two or three years — not actively engaged in any particular com- 
pany or mill. 

Q. Were you earlier associated with the cordage combinations, so 
called ? — A. I was an employee of the National Cordage Company, 
and when they failed then I was an employee of the United States 
Cordage Company, and when they failed I was an employee of the 
Standard Rope and Twine Company. 

1 XIII R. I. C. 1 1 2-164. The figures on the left hand margin refer to the original 
pagination in the Report of the Commission, — Volume XIII. The testimony 
is in the order given but some questions and answers are omitted because irrelevant 
to the present purpose. 

no 



INDUSTRIAL COMMISSION TESTIMONY III 

General Nature of the Cordage Business 

Q. Will you tell us briefly, in your own way, the general nature 
of the cordage business in which these combinations have been en- 
gaged ? — A. The mercantile and other lines of business ? 

Q. Yes, both the mercantile and manufacturing business, partic- 
ularly the manufacturing. — A. Well, I do not know exactly how 
to answer that question. 

Q. What is the nature of the business ? — A. To manufacture 
manila, sisal, New Zealand, Russian, Mauritius, and American hemps 

— in other words, fibers — into what is called ropes, cordage, and 
binding twine — that is a different thing from commercial twines — 
and, of course, the distribution of that product throughout the country. 

Market for Manila and Sisal Rope 

[113] Q. (By Mr. Phillips.) What is the chief market for the rope ? 

— A. It is all over the country. There are different kinds of rope. 
For instance, there is manila rope and sisal rope. The other ropes 
are of less consequence. We do not pay any particular attention 
to them. The manila rope is of course used very largely for marine 
purposes all along the seaboard and also on the lakes. 

Q. Does that constitute as large a market as the use of it for drilling 
purposes and boring wells ? — A. Oh, larger. 

Q. A good deal larger than for all the salt and gas and oil wells ? — 
A. I think so. I do not know what proportion this use for drilling 
requires, but I should say it is comparatively small, although it is a 
good trade. 

Q. (By Mr. Jenks.) What is the chief use for sisal ? — A. The 
sisal is not used for the marine to any great extent. Once in a while 
it may be, when the prices are high, but not much. It goes into the 
South and West and is used for hoist ropes, and there is a large pro- 
portion of it used for different purposes, on railroads, constructing 
buildings, binding, and things of that kind. 

Amount of Capital required for a Cordage Plant 

Q. Does the manufacture of cordage at present require the invest- 
ment of a large amount of capital in order to carry on the business 
successfully ? — A. Yes ; a comparatively large capital, but not, 
of course, as compared with steel plants and mills of that kind. 



112 THE NATIONAL CORDAGE COMPANY 

Q. How much capital would, in your opinion, be required to 
establish a thoroughly equipped and successful plant for the manu- 
facture of cordage ? — A. Well, it would depend on the size of the 
plant, of course. For a 500 spindle mill — that is a pretty good- 
sized mill — about $500,000 would be required. That includes 
the land and buildings and the equipment with all kinds of machinery 
and boilers and engines and shafting, and putting the plant into 
complete working order. That is an estimate which I would say 
represents fairly the outlay, and the working capital would have 
to be in addition. 

Q. How much working capital would be required in addition to 
run it successfully ? — A. I should say probably about $250,000. 

Improvements in Methods of Manufacture — Patents have Expired 

[114] Q. (By Mr. Phillips.) Has there been any advance made in 
making cordage, any improvement in methods, within the last 25 or 
30 years ? — A. Oh, yes; since 25 years ago the improvements have 
been quite rapid. The rope to-day is made by machinery, which, 
I think, has all been invented within 25 years. 

Q. Are there any processes or patents that are peculiar to any one 
concern that the others do not have ? — A. I think the patents 
have all run out. The John Good rope machines and preparing 
and spinning apparatus were supposed to be the best, and I think 
they were the best invented. 

Q. That was a patent ? — A. That was a patent, but I think it 
expired a few years ago. 

Q. (By Mr. Jenks.) So that at the present time the advantages 
of any of these larger establishments do not rest particularly upon 
the control of patented machines or anything of that kind ? — A. No. 
not that I am aware of. If there is anything I do not know of it. 

Raw Material and Machinery used in Hemp Manufacture 

Q. Is the raw material for binder twine the same substantially 
as for cordage ? — A. Yes. 

Q. They use manila hemp also ? — A. Well, they use it, but 
they have not used very much of it for the last year or two, because 
it has been so high. 

Q. What do they substitute for it ? — A. They use the sisal 
and a mixture. Binder twine consists mainly of sisal, the pure sisal; 



INDUSTRIAL COMMISSION TESTIMONY 113 

but they have a mixture of sisal and pure manila, and it practically 
makes the binder twine. 

Q. Is the machinery in those factories like that for the cordage 
manufacture, and can the cordage manufacturer make binder twine 
and the manufacturer of binder twine make cordage ? — A. They 
can do it unless the mills are put up especially as twine mills. All 
of the rope mills are supposed to make binder twine, but the twine 
mills cannot make the rope unless they have the machinery for it. 
They can make the yarn, but they cannot make rope unless they 
have the machinery. 

Fluctuations in the Price of Hemp 

Q. And what would you give, then, as a fair average price per 
pound for cordage ? — A. Cannot tell. It depends altogether on 
the price of hemp, and that varies. I will give you an idea of it. 
For instance, during the last three years the fluctuations have been 
very violent. Manila hemp has sold down as low as 3! cents a pound, 
I think, and as high as 14! cents; sisal hemp in proportion. Sisal 
hemp went down one time as low as 2 J cents a pound — I am speaking 
now from memory — and up as high as 10 cents. 

Conditions which led to Formation of National Cordage Company 

[117] Q. (By Mr. Jenks.) Let us take up again the question of 
the National Cordage Company. When was that organized ? — 
A. In 1887. 

Q. What were the chief reasons that led to the organization of 
that company ? — A. Well, I am not able to give you them. You 
must remember that with the organization I had nothing to do. 
I have never been connected with the company in any official capacity 
that would give me the inside motives for its organization. 

Q. Do you know what the conditions of the business were ? — 
A. I know what the conditions of the business were, and I can give 
you those, but I can only give them to you in a general way — informa- 
tion picked up here and there, which I believe to be correct; that is 
all. One of the motives leading to the formation of the company, 
as I understand it, was that they could, by gradually combining 
all these mills, reduce the cost of production. They could also reduce 
the cost of distribution; that would also make a more stable hemp 
market and consequently a more stable rope market. If they con- 



114 TEE NATIONAL CORDAGE COMPANY 

trolled, for instance, the mills of the country, there would be one 
buyer of hemp instead of 20 or 30. Instead of competing against 
each other all the time and pushing the price up and up, there would 
be one buyer, and that would result probably in a fair price; at any 
rate, they would be willing to take hemp at a fair price. 

[118] Q. (By Mr. Phillips.) Did the competition of the companies 
in selling have a great deal to do with forming the National ? — A. Un- 
doubtedly. 

Q. Was the chief object to get rid of the competition in selling ? — 
A. That was another object. As I said, in distributing the goods 
that was a very important point. 

Q. Do you believe in the competitive system ? — - A. I believe 
in the competitive system; there is no question about that; but my 
experience in the rope trade has been such as to lead me to think that 
the competitive system there has been very disastrous. 

Q. (By Mr. Jenks.) Was the competition before the organization 
of the National Cordage Company as severe as it is to-day ? — A. No; 
in those days before the National Company was formed the manu- 
facturers had an understanding with each other by which they made 
some money. 

Manufacturers included in National Cordage Company — Output 

Controlled 

Q. Was the intention at the time of the organization of the Na- 
tional Cordage Company to bring nearly all of the leading manu- 
facturers together ? — A. That is as I understand it. 

Q. About what percentage of the output of the country did the 
National Cordage Company eventually control ? — A. I cannot give 
you the proportion of the output, but they had a great many of the 
mills, and they had one or two very strong competitors whom they 
did not get hold of. 

Q. The John Good Cordage Company? — A. No; they had an 
arrangement with them by which they shut up; they controlled 
them for the time being, but afterwards they broke loose. But the 
Plymouth Cordage Company and the Fitler Cordage Company of 
Philadelphia were two prominent concerns, and then there was the 
Pearson Cordage Company. 

Q. Where was that located? — A. That was in Boston; that 
is now one of the Standard companies, but those three they never 
acquired. Whether there were others, I do not know. 



INDUSTRIAL COMMISSION TESTIMONY 115 

Q. Those were the leading ones remaining outside ? — A. Yes. 

Q. You have not any definite idea as to the percentage of the busi- 
ness controlled by the National Cordage Company; for example, 
whether it was 60 or 75 ? — A. No; I have not. They controlled 
a large portion of it, but I do not know what it was. 

National Company did not secure all of its Objects 

Q. At the time the National Cordage Company was doing business 
with comparative success did they succeed in steadying or controlling 
the market for hemp? — A. No; not altogether. They had this 
other competition and they were all of them working right against 
each other. 

Q. As a matter of fact, did they succeed in controlling the material ? 

— A. They never got to that point; they failed before they reached 
the point they were striving for. 

Q. Did they succeed in making any substantial economies in 
the cost of selling ? — A. That I cannot say. 

Reason for the Failure of the National Cordage Company 

Q. This company went into the hands of a receiver about what 
time ? — A. In 1893. 

Q. Have you any knowledge or any information that seemed 
to you satisfactory as to the special reasons for the failure ? l — 
A. Only what is before the public. The company evidently did 
not have money enough to carry the scheme through. They had 
purchased a great many mills throughout the country, and they 
did not make money enough to carry the plan out as they intended. 

Q. Were there any serious charges made at the time with reference 
to speculation in the stocks of the company as a cause of its failure ? 

— A. I never heard of that. I heard it rumored that they were 
working a good deal in the stock market, but I never heard that in 
the light in which you put it. 

Q. Was the apparent reason for the failure that they had at- 
tempted to take in more mills at high prices than the state of the 
market would justify ? — A. And did not have means to do it. 
That is my idea. 

Q. (By Mr. Farquhar.) Did the shrinkage in stocks impair the 
credit of the company ? — A. Undoubtedly. 

1 See pp. 130, 155. 



Il6 THE NATIONAL CORDAGE COMPANY 

Q. Was that the real reason for the failure ? — A. I do not know 
about that. Of course what precipitated the matter was the fact — 
perhaps you all remember it — that they proposed to issue, I think 
it was two million and a half preferred stock. That was the straw 
that broke the company's back. 

[119] Q. The company had lost public faith and credit, and they 
could not float the stock ? — A. Yes; and I guess some of the bears 
on the stock market took the cue and attacked them. 

Q. (By Mr. Jenks.) Was there anything in the nature of the busi- 
ness itself that tended to precipitate the failure ? Was there a fall 
in the price of hemp when they had a large stock on hand, or any- 
thing of that kind ? — A. Yes ; I think so. I hardly like to go on 
record about that, becuase it is a matter about which my memory 
may be at fault; but my idea is that for a time they made a great 
deal of money; prices were very high. Then the turn came, and 
of course when that came they had to suffer. 

Reorganization — The United States and the Standard Companies 

Q. Perhaps now you will sketch in your own way, rather briefly, 
the change from the National Cordage Company into the United 
States Cordage Company, and then from that into the Standard 
Rope and Twine Company, so far as they are the same plants. 
Then I will ask you to speak later with reference to your own associa- 
tion ? — A. The National Company failed in 1893. They im- 
mediately went to work to reorganize the company. They assessed 
both the preferred and common stockholders, if I remember rightly, 
and raised about $3,000,000, and formed the United States Cordage 
Company. Now, just the amount of securities that were out in 
the United States Cordage Company I do not recall. That is a 
matter of record anyhow. I think the United States Cordage 
Company was in existence about a year, perhaps a little more, and 
then they failed. Then they were succeeded by the Standard 
Rope and Twine Company on the same basis of an assessment 
against the stockholders, and when that was done their stock was 
scaled down from — I think their common stock from $20,000,000 
to $12,000,000. 

Q. At the time of the reorganization into the United States 
Cordage Company was there any cutting down of the stock ? — 
A. I think not. I think there was simply a change of the form. 



INDUSTRIAL COMMISSION TESTIMONY 117 

Q. Was there a change in the management ? — A. The manage- 
ment was changed, I think. I suppose you have the information 
all there, while mine is simply a matter of memory. 

Q. You intended to run on the same basis of capitalization as 
before ? — A. Yes; I think it was not cut down. 

Q. Was the failure of the United States Company from sub- 
stantially the same cause as that of the National Company ? — 
A. Yes; from trying to do too much without enough money to do it. 

Q. The Standard Rope and Twine Company cut down their 
capitalization ? — A. They reduced their capital from $20,000,000 
to $12,000,000. That is where their capital stock stands to-day. 
They had $7,500,000 first mortgage bonds which they put in the 
form of income bonds, not drawing interest unless it was earned. 
Then they had the $3,000,000 raised by assessment, and they put 
that into first mortgage bonds — 6 per cent gold bonds. 

Disposal made of some Plants by the Standard Company 

Q. Did they dispose of any of the plants or did they keep them 
all ? — A. They disposed of quite a number of them. 

Q. Was that the reason they reduced the capital? — A. Well; 
I do not know. 

Q. If they disposed of plants they had the money to use ? — 
A. I do not know. I never heard. My idea was that they thought 
that by the reduction they could get down to some reasonable 
point where possibly there might be a chance to pay something 
on the stock. 

Q. (By Mr. Phillips.) Were the plants they still owned utilized 
for manufacturing purposes or were they wrecked ? — A. Some 
were used and some were wrecked. 

Q. In selling, did they pay attention to that ? Did they fear 
competition in selling them ? — A. I do not know about that. 
They evidently did not fear it in some instances. 

Standard Company's Spindles compared with total number of 
Spindles in the Country 

Q. (By Mr. Jenks.) Suppose we take the present situation of the 
Standard Rope and Twine Company under its last reorganization. 
You said a while ago that there is a very vigorous competition 
at the present time in the trade ? — A. Yes. 



Il8 THE NATIONAL CORDAGE COMPANY 

Q. Do you know what percentage of the output the Standard 
Rope and Twine Company has now ? You spoke of that as the 
largest concern ? — A. I do not know. You know these things 
are all estimated, because there are no returns given. There is 
[120] not a manufacturer who gives his returns, and we do not 
know what he is doing. All we can do is to guess at it, or estimate 
it from the number of spindles they keep in operation. 

Q. Do you know what percentage of the spindles of the country 
is controlled by the Standard Rope and Twine Company ? — A. I 
can guess at it and come very close to it. I am now speaking of 
the active spindles and not the total spindles. I know about how 
many spindles they are working, but I have not the figures in regard 
to the others. They are working about 1,800 spindles. 

Q. What is your estimate of the total number of spindles in the 
country ? — A. I calculate that in the United States there are 
about 11,000 spindles in use or ready to start. This is east of the 
Rocky Mountains — paying no attention to the Pacific coast. 

Reason for Formation of the Cordage Manufacturers 1 Association 

Q. What is your association ? — A. It is called the Cordage 
Manufacturers' Association of the United States. 

Q. Will you kindly tell us what the nature of the association is ? 
Tell us first how it happened to be gotten up, the nature of it, and 
what you do. — A. After the failure of the National Cordage 
Company the cordage trade was in a very bad condition, and the 
competition among manufacturers became very keen, and they 
became very much separated from one another. The competition 
was so keen, prices so low, and business so poor that some of them 
thought it was about time to get together and have a better under- 
standing and better comradeship, you might say, than existed. 
I will not say the manufacturers were unfriendly, but they were 
all separated — there was no community or feeling of fellowship. 
So this association came about. The manufacturers came together 
and talked over matters and thought that some good could be done 
by keeping a little closer to each other, and so they formed this 
association. They met at first in New York at a dinner there; 
then they formed the association, and since then they have been 
having these meetings, not at a stated time, but whenever they felt 
called upon to have them — sometimes at long intervals and some- 
times short. 



INDUSTRIAL COMMISSION TESTIMONY 1 19 

Chief Motives leading to the formation of Cordage Combinations 
[122] Q. (By Mr. Phillips.) Were all the efforts that have been 
made by the cordage companies toward consolidation made for the 
purpose of preventing competition and getting larger prices for the 
goods ? Has the elimination of competition in the buying and in 
the selling been the chief object in forming these combines hereto- 
fore ? — A. That is my understanding of it. Of course, they were 
formed by men who had certain objects in view. I understand 
those objects have been to reduce the cost of production, to minimize 
the competition in the purchase of hemp, to minimize also the cost 
of distribution, and to make a steadier or more even market — to 
do away with this active competition among the different mills. 

Washington, D. C, April 13, 1901. 
Testimony of Mr. James M. Waterbury 

Former president National Cordage Company, New York City 

[123] The commission met at 10.48 a.m., Vice-Chairman Phillips 
presiding. 

Mr. James M. Waterbury, former president of the National 
Cordage Company, New York, appeared as a witness, and, being 
duly sworn, testified as follows: 

Q. (By Mr. Jenks.) Will you kindly give your full name and 
address to the stenographer ? — A. James M. Waterbury; 69 
South street, New York, is my business address. 

[124] Q. What is your business? — A. I am president of a 
company which manufactures rope. 

Q. What is the company ? — A. Waterbury Rope Company. 

Formation of Pools — their Characteristics 
[126] Q. So far as you are aware, was there any union of interests 
more or less close among the cordage manufacturers before the 
organization of the National Cordage Company? — A. Yes; at 
various times there very often had been; they had pools. 1 
^ Q. Will you describe in a word or two the nature of those organiza- 
tions ? — A. Well, all manufacturers would meet and agree to 
divide the business of the country upon certain percentages, and 
when they had agreed on the percentages the rule was that each 

1 See pp. 138, 147. 



120 THE NATIONAL CORDAGE COMPANY 

manufacturer should make his returns monthly to a supervisor, 
and if his business ran beyond his percentage he paid in to the 
supervisor so much per pound on the excess beyond his percentage; 
and then those that went below that percentage drew out from the 
supervisor an amount as much per pound as they went below their 
percentage. The supervisor acted as a clearing house for the manu- 
facturers. 

Q. Were there several such pools at different times ? — A. There 
have been several such pools. 

Q. Were you ever in any of those pools ? — A. Yes; I was a 
member of some of the later ones. I think they ran all the way 
from i860; I have heard so. 

Q. Did any of them last long ? — A. I think they lasted about 
three years, and they were broken up by other new competition 
starting, or by some men not being willing to act up to the agree- 
ment. Of course there was no legal way of holding a man to his 
agreement. We had no written agreement. 

Q. Simply a verbal understanding ? — A. Yes; an understanding. 

Q. Could you have had any written agreement ? — A. I do not 
think we could. 

Q. How general were these pools ? What proportion of the 
cordage manufacturers did they include ? — A. I think they in- 
cluded them all in those times. There were not many manufac- 
turers then; 10 or 15, something like that. 

Pools suggest closer union of Cordage Manufacturers 

Q. Did the failure of these pools to hold the members closely 
together have anything to do with the organization of the National 
Cordage Company ? — A. Well, I believe it did. Of course, what 
went through my mind 12 years ago I cannot tell, but I know the 
pool made the business profitable, and induced me, for one, to favor 
a closer alliance with the manufacturers. 

Q. These pools had been running continually for a few years 
before that ? — A. Yes; breaking up and fighting, and then getting 
together again. 

National Cordage Company first organized as a Trust 

Q. Was there any consideration of organizing into a trust, in 
the form of the earlier sugar trust and standard oil trust, and so on ? 
— A. You mean in these pools ? 



INDUSTRIAL COMMISSION TESTIMONY 121 

Q. I mean, as these pools failed and there was a thought of 
organizing more firmly in the cordage industry, was the plan to 
take the trust form ? — A. At first the cordage company took the 
trust form and issued trust receipts to the members, but I think 
we were advised that that was of doubtful legality, and certain 
laws were being passed in regard to trusts, and they were changed 
into corporations. 

Q. Did you issue trust certificates ? — A. They issued trust 
certificates. I do not think it was actually declared illegal, but it 
was becoming unpopular, so we were obliged to change the form 
[127] of organization. I think the only object of the trust was to 
make less taxation on capitalization under the State laws. 

Q. Was the trust firmer in its nature and form of organization 
than the pool ? — A. Yes ; at first that only included a few con- 
cerns. That was the beginning of the National Cordage Company, 
which started with only 4 concerns. 

Reasons for forming National Cordage Company 

Q. What were the other reasons that you had for bringing to- 
gether the National Cordage Company, besides the lack of stability 
of the pools ? — A. Well, the object of bringing it together was to 
economize in the distribution of products, which we thought could 
be accomplished, and also to try and steady the hemp market by 
eliminating a number of buyers of the product; and also to have 
a more stable and steady market for the manufactured goods. 

Q. Was it expected that the National Cordage Company would 
probably be able to get entire control of the industry, as the pools 
had done ? — A. I do not know as they ever thought they could 
do that, but they thought they could get a large majority of the 
industry together. 

Organization of National Cordage Company — starts with Four 

Concerns 

Q. Perhaps you will, without specific questioning, tell us the way 
in which you went to work to organize the National Cordage Com- 
pany, the general method of financiering, and the capitalization ? — 
A. Well, when we started in the first place we did not ask any 
outside aid. We started with 4 concerns. 



122 THE NATIONAL CORDAGE COMPANY 

Q. Will you tell which ones they were? — A. Yes; the Henry 
Wall's Sons, the Tucker & Carter Cordage Company, the Elizabeth- 
port Cordage Company, and L. Waterbury & Co. 

Q. What proportion of the trade did these four companies control 
at that time ? — A. Well, they were considered the Big Four New 
York manufacturers. I cannot remember the proportion at all. 

Q. They had a good part of the trade ? — A. They were all 
big concerns and had a good part of the trade. L. Waterbury & Co. 
was the largest concern in the country at that time, and had the 
largest percentage in the pools. 

Q. Do you recall the percentage ? — A. No; I cannot remember. 

Q. Do you suppose these 4 companies had 25 per cent of the 
product of the country ? — A. I should think they must have had 
40 or 50 per cent. 

Plan of Organization and Operation of National Cordage Company 

Q. Now, if you will go on ? — A. Well, it was originally organized 
with these 4 concerns, and they paid in a cash capital of one and a 
half million dollars, and the plan of organization was this: Instead 
of actually buying out all the different concerns so as to eliminate 
their interests from the business, we adopted a plan of having each 
concern stay in business and bid each year for the amount of stuff 
that it would make, and the price at which it would make it for the 
National Cordage Company. The idea was that if we bought out 
all concerns, their interests would be eliminated and it would be 
much more difficult to run these concerns profitably and economically 
than if we kept every manufacturer in the business. So every 
manufacturer was under contract to bid each year the amount of 
stuff he could make, and the contract would go to the lowest bidders, 
and consequently any man who did not bid had to shut up his 
factory at his own expense, and that was not very economical. 
Each manufacturer would have to manufacture at a low price, 
or it would cost him money to keep his factory closed each year. 
I think some were willing to bid below cost of making in order to 
keep their factories going, and at the same time use their best en- 
deavors to reduce the cost of making rather than close their factories 
down. When the stock was eventually listed on the Stock Exchange, 
the application was only made to list the preferred stock, and when 
I explained that system to the Stock Exchange committee, they 
said it was a novel idea, and they asked me to list the whole thing 



INDUSTRIAL COMMISSION TESTIMONY 1 23 

at once. So the common stock was listed at the request of the 
Stock Exchange committee at that time, because they thought 
we had a pretty sound scheme of consolidation. 

Buying of Material and Selling of Product — How Regulated 

Q. The several companies manufactured for the National Cor- 
dage Company, and the National Cordage Company was expected 
to be the general selling agent for them all ? — A. Yes ; that was 
the theory at the beginning. 

[128] Q. (By Mr. Phillips.) And the individual companies lost 
if they shut down their works ? — A. Yes; if they shut down their 
works they had to pay the expense of keeping them closed that 
year. 

Q. Not out of the general funds, was it ? — A. Out of their own 
pockets. 

Q. (By Mr. Farquhar.) How did you regulate the buying system 
then ? — A. The National Cordage Company bought all the fiber 
and distributed it to the different companies, who manufactured 
for them under contract conditions. 

Manner in which Profits were Distributed 

Q. (By Mr. Litchman.) How was the distribution of profits 
made ? — A. Oh, by the stock holdings in the National Cordage 
Company. 

Q. That was based somewhat on the value of each individual 
plant? — A. Yes; and this was a matter of negotiation. When 
the company was first started there were disputes, and they were 
settled by negotiation. 

Q. Then if a plant shut down and did no work, against the loss 
by reason of non-employment was the offset of return on other 
properties ? — A. But it is very hard to shut a factory down and 
start up in a year, for you lose all your good men, and you have a 
variety of expenses while shut down. 

Organization of Company {continued) — Other Concerns taken in 

Q. Well, now, if you will continue further. You had told us 
of the form of organization, so far as bidding of the manufacturers 
is concerned, and the fact that you had the stock listed on the stock 
exchange. — A. It was not listed at that time; it was listed later; 



124 THE NATIONAL CORDAGE COMPANY 

and then we went to work to get in more concerns, because we were 
intending to do that. We intended to take in quite a number, and 
I suppose we had at last some 15 concerns, although there were 
some big concerns outside which we never could get in. 

Concerns inside and outside of National Cordage Company 

Q. What were the leading concerns outside ? — A. Well, the 
Plymouth Cordage Company, of Plymouth, Mass. ; the E. H. Fitler 
Company, Philadelphia, and the Pearson Cordage Company, of 
Boston, which was owned by the McCormick Harvesting Machine 
Company. Those were the principal ones outside. 

Q. Was the John Good Company in? — A. No; it was not. 
It was of small account at that time. 

Q. You spoke of attempting to get these in, and of getting in a 
number. You had something like 15, you say ? — A. That is my 
general recollection. 

Q. Can you tell about what proportion of the output that made ? 
— A. Well, I think that must have given us 60 to 70 per cent of 
the output. 

Limited Supply of Raw Material prevented a Saving in Purchase 

of Same 

Q. Was that enough so that you were able to make material 
economies in the purchase of your raw material ? — A. Well, 
this is rather interesting, I think. It developed a very strange 
trade condition. The supply of the raw material in our industry 
is limited — there is just so much of it. We figured that we had 
an immense capacity, as we had. None of the factories had run 
full force. Our idea was to run full and buy our raw material 
and make goods cheap and do business on an economical basis, 
[129] so our first move was to get raw material — we had to have 
raw material. In attempting to get the raw material, naturally the 
Plymouth and Fitler companies also wanted to get it, and con- 
sequently that ran the raw material up, and that would not work. 
The raw material was limited; it is not like cotton. That was the 
difficulty we struck at the very beginning. We could not run our 
mills full on account of the competition of the mills outside insisting 
on running their mills, too, and the desire to make low prices in 
manufactured goods was of no benefit to anybody, on account of 
the above condition. 



INDUSTRIAL COMMISSION TESTIMONY 1 25 

Basis of Capitalization was Earning Power of the Plants 

Q. In taking into the National Cordage Company those concerns 
that you bought and in floating your company, what basis of cap- 
italization did you have ? — A. We adopted as the basis of capital- 
ization the earning powers of these different companies. 

Q. How was that fixed ? — A. Well, we knew what they earned 
in the past. 

Q. They simply turned in their books ? — A. Well, we knew by 
their statements. Every concern that came in had been making 
a profit for a great many years; we were all practical cordage men, 
and all had made fortunes in the business practically many years 
before — we and our predecessors in the same concerns. 

Q. So you had your annual statements of your profits, and on 
that basis you made your capitalization ? — A. Yes. 

Q. For how many years previous did you take this particular 
estimate ? — A. I forget whether it was three or five years — some- 
thing of that sort. 

Q. And you capitalized on what percentage ? — A. We estimated 
the value of the plant, cash capital, and the rest of it was made up 
of the earning power. I forget now whether that shows in the 
minutes of the organization. It is so long ago that I do not know. 

Q. Have you possession of the minutes ? — A. No ; all papers 
and minutes were turned over to the receivers of the company. 
I have never seen them since. 

Q. Do you recall the basis of earnings on which you made this 
capitalization — 6 per cent, 7 per cent, 5 per cent ? — A. I think 
it was a 10 per cent basis. 

Q. A 10 per cent basis ? — A. Yes; that seemed to us the natural 
basis for this reason: About that time a good many organizations 
came out, and English concerns bought out American concerns. 
Some English concerns came to us and said they would buy us out 
at ten times our average profit for the previous 3 years if we would 
continue to run the business 5 years under a salary. It shows 
that that was about the financial basis of capitalization at that time. 

Q. You were not willing to sell ? — A. No; we refused it. 

Q. You had been making more than that ? — A. They were 
willing to pay us ten times. 

Q. You had been making more than that ? — A. We preferred 
to be independent at the time; we did not care to sell out. 



126 THE NATIONAL CORDAGE COMPANY 

Division of Capital — Amount of Common and Preferred Stock 

Q. How was your capital divided ? — A. At that time, $10,000,- 

000 common and $5,000,000 preferred stock. 
Q. No bonds ? — A. No bonds. 

Q. Was there in this division between preferred stock and com- 
mon stock any attempt to distinguish the different kinds of property, 
tangible assets, good will, and so on, of the business ? — A. I do 
not quite understand what you mean. 

Q. You said you had capitalized on the basis of your earning 
capacity. Assuming a 10 per cent basis, was the preferred stock 
and the common stock supposed to be issued on equal terms ? — A. 
We capitalized on three things — cash capital, the value of the plants, 
and the earning power — and those three things made up the capital- 
ization. Now, the preferred stock, of course, had a first lien on 
our assets, and that would take the cash capital and the plants 
first, and the common stock would take part of it, and the earning 
power would be the rest of it. 

What per cent of Stock represented Tangible Assets 

Q. Did you consider that your tangible assets — that is, the 
plants themselves, which were cash capital — amounted to more 
than $5,000,000 ? — A. Well, let me see — I really can't remember, 
but I know we had values put on them, and whether it will show 
in the first item I do not know; it was 12 years ago. I think there 
must have been some good will in there, too. 

[130] Q- So that the $10,000,000 of common stock would then 
be all good will; perhaps part of the preferred stock also? — A. 

1 think that is very likely, on the actual cash value, but if you go 
to a man to buy his plants out it is a question what you mean by 
value and what he wants to sell for with him, and it is a question 
what that is in that valuation; the common stock 

Q. (Interrupting.) On the basis of the earnings of these separate 
plants before the organization, would it have been possible to pay 
10 per cent on your $15,000,000 of capitalization, preferred and 
common stock, both ? — A. Yes ; I believe so. 

Q. On the basis of the actual earnings before the organization ? — 
A. I believe so; yes. Certainly in good years it would. 



INDUSTRIAL COMMISSION TESTIMONY 12J 

Question of Inflation — Disproportion of Common and Preferred Stock 

Q. (By Mr. Farquhar.) Was there any attempt at inflation 
at all in the issue of your stock ? — A. Well, it was issued for good 
will — a large amount of it — like all industrial organizations. 

Q. You had, outside of orders of the separate concerns, the profits 
of ten years — equal to more than the preferred and common which 
was covered ? — A. Yes; but if you take the actual tangible value 
of the plants the amount of stock more than covered it. It is good 
will and earning power that makes stock at higher figure. 

Q. The question I think Mr. Jenks wants to get at is the dis- 
proportion of the preferred, which represents tangibilities, to your 
$10,000,000 of common stock representing good will. — A. I will 
tell you why it is hard for me to remember. The preferred stock 
was not issued at the beginning, and at the time it was issued we 
had come into possession of a great many more plants, and what 
the actual tangible value of the assets were I don't remember. 
My impression was when you first asked me that the $5,000,000 did 
not even cover the tangible assets. 

Taking in of other Plants — How they were paid for 

Q. Was this $15,000,000 of capital issued on the basis simply 
of the four plants that went in first ? — A. Yes ; but it was under- 
stood that they would use their capital stock to get in other plants. 
That was a private understanding, and our capital stock was not 
increased for a long time, although we took in a great many more 
plants. 

Q. From time to time, as you took in other plants, you sold more 
capital stock? — A. No; we made a syndicate and pooled it. 
That was an agreement between the stockholders. 

Q. In the buying of these various plants did you ordinarily pay 
in this stock ? — A. Yes ; we paid some stock and some cash and 
sometimes took the plants subject to mortgage — bought in all 
kinds of ways. We had a great many negotiations, lasting over a 
good while. 

Q. (By Mr. Jenks.) Suppose you explain a little further the 
typical way, if I may so call it, of taking in some of the plants on 
mortgage. — A. Well, for instance, a plant was willing to sell out 
for $500,000, and they were willing to take $250,000 in stock and 
$150,000 in cash, leaving the balance a mortgage on the plant. 



128 THE NATIONAL CORDAGE COMPANY 

Q. Didn't put a mortgage on the whole property ? — A. No; 
just on that specific plant. 

Q. (By Mr. Farquhar.) On the difference left in a division of 
that kind, do you make a debenture of $100,000, for instance ? — 
A. No; the mortgage will just be a mortgage on that plant like any 
concern buying a piece of property subject to mortgage. 

Q. Did it have priority of lien over other claims ? — A. On that 
one plant; only on that one specific plant. 

Company made Handsome Profits — Causes of its Failure 

Q. You had anticipated that through the economies of the com- 
bination you would make higher earnings than before ? — A. We 
hoped so; yes. 

Q. Now, you have given the reason why you were not able to 
get additional profits in the purchase of your raw material. Can 
you tell any other particulars in which your calculations fell short ? — 
A. No. We were able when we got a number of plants to make a 
very handsome profit, and the whole history of the thing, as I remem- 
ber, was this: We did get along, making a handsome profit. It 
did not result to the benefit of the consumer because it raised the 
price of hemp, and toward the end the reason the National Cordage 
Company failed was that it did not have enough capital to carry on 
its business. Binder twine is a one-season business; it is all used 
in the summer. You have got to begin in August and September 
[131] for the next year; so in the spring of 1893 we had on hand, I 
think, some 25,000 tons of binder twine, worth five or six millions 
of dollars, made out of hemp at a fairly good high price, and conse- 
quently of good value. We borrowed money against that; we 
had unlimited credit; my concern alone always had unlimited credit, 
and we were able to borrow all the money we wanted, and we did 
not think we would ever be placed in a position where we could not 
get all the money we wanted. But early in the spring of 1893, 
the Reading Railroad failure — that was the first shock that hurt 
us; the bankers were afraid and were becoming disturbed and were 
worrying about the silver question, just then beginning to agitate 
them. I know we did not realize how disturbed the bankers were, 
but they notified us two months before we failed that they would 
not be able to loan us so much money. Then we determined we 
had better issue some more preferred stock. The preferred stock, 
I think, was selling at about no, and we thought we had better 



INDUSTRIAL COMMISSION TESTIMONY 1 29 

issue more preferred stock to increase the working capital and to 
make ourselves independent of the bankers. It was that increasing 
of the preferred stock which was noticed. It got out on the market 
and that caused a panic in our stock, and that caused all our creditors 
to jump on us. The bankers had liens against the twine and wanted 
their pay, and with us the only safeguard was to have a receiver, 
otherwise some people would have received a preference; but the 
failure was entirely due to the inability to get credit, which had 
never been curtailed before in our history, and the uneasiness due 
to the general distrust in regard to the silver question and the failure 
of the Reading Railroad Company. 

Dividends paid on the Stock 

Q. You said you were making handsome profits — how much ? 
— A. I forget the regular published record of the dividends paid. 
We had to make an affidavit that all our dividend money depos- 
ited 

Q. (Interrupting.) You, of course, had been paying full dividends 
on your preferred stock. Do you recall the profits you paid on the 
common stock ? — A. I think it was 6 per cent. 

Q. And you paid as much as that from the beginning ? — A. Yes ; 
we paid 12 per cent on $10,000,000, and I did not tell you that later, 
some years afterwards, we increased the common stock to $20,000,000 
and then we paid 6 per cent on that. 

Amount of Stock — what Proportion represented Tangible Assets 

Q. When you had increased your common stock to $20,000,000 
did your preferred still remain at $5,000,000 until this last issue of 
1893 ? — A. That never took place. It always remained at $5,000,- 
000. 

Q. You perhaps have already said that even after you had taken 
in those 15 plants — say you had as many as 15 plants — that the 
probability is that the actual selling value — the tangible assets — 
of those plants was not above the $5,000,000 ? — A. I say it would 
be above when all were taken in. The reason I was mixed up before 
is that I was thinking of the 4 original plants for which preferred 
stock was issued. I think the tangible assets were much more than 
$5,000,000. 

Q. Do you recall about where the tangible assets went ? — A. No ; 
I cannot remember. 



130 THE NATIONAL CORDAGE COMPANY 

Q. As high as $10,000,000, you suppose ? — A. I think more, 
likely. I cannot remember. This was 12 years ago, and I have 
not seen the books since. 

Effort to Control the Raw Material — Discriminating Contract 

A. (Continuing.) It might be interesting, if it would not tire you, 
to tell you of some of the efforts which were made in the hemp 
market to control the hemp situation. There were 5 houses dealing 
in manila hemp in Manila. They were Kerr & Co., Smith-Bell, 
Stevenson, McLeod, and Warner, Barnes & Co. We sent an agent 
to Manila (we were very large buyers of hemp) to make an agree- 
ment with those houses that they would sell us exclusively in this 
country their manila hemp. 

Q. About what date was this ? — A. That contract was drawn 
in London and it was a very elaborate affair, and these 5 English 
houses also agreed in it that they would not sell any house in England 
manila hemp unless that house in turn agreed that they would not 
sell to anyone in this country except at an advance of over half a 
cent a pound above the price we were paying. 

Q. That was the effort you were making to shut out these outside 
concerns ? — A. To get an advantage over our competitors. 

Q. About what time was that ? — A. I do not know. Those 
contracts are in the receivers' hands. 

[132] Q. (By Mr. Phillips.) This was an effort to control the 
raw material ? — A. To get an advantage over our competitors 
of half a cent a pound. 

Q. Were there any houses left in Manila who could be com- 
petitors ? — A. No; we had them all. 

Q. How did your competitors secure their hemp ? — A. For a 
number of months they paid half a cent a pound more than we did 
for our hemp, but it finally resulted in some English houses in Eng- 
land buying hemp and defying the agreement and selling them, 
after having taken legal advice that the contract would not hold 
in the English courts. It was an interesting attempt, that was all. 

Discriminating Contract made with respect to Machinery and Repairs 

Q. (By Mr. Jenks.) Which worked about six months ? — A. 
Yes; and finally fell through because the people would not live up 
to it. We also had an agreement with John Good and other manu- 



INDUSTRIAL COMMISSION TESTIMONY 131 

facturers of machinery not to sell machinery or repairs to any con- 
cern but ours. 

Q. How long did that hold ? — A. Well, competition killed 
that. A new concern started up. 

Q. Did John Good have patents covering his special machinery ? 
— A. Well, the only patent he ever had was on a machine called 
the " breaker," and that, I think, ran out at that time, and we 
afterwards found out that the patent was probably not good anyhow. 

Q. Did that give you an advantage for a period of some months, 
or a year or so ? — A. Well, we thought that would stop the estab- 
lishment of new factories. It did not affect the ones in existence. 
The National Cordage Company was advertised, so that that did 
really in the end a good deal of damage, because factories started 
all over the country, making severe competition. 

Amount of Capital Required to Start a Cordage Manufactory 

Q. About how much capital does it take to start a good cordage 
manufactury ? — A. It takes only a small capital; it depends. I 
should say with $100,000, leaving out the working capital, you can 
start a nice factory. 

Q. How much more would it take with working capital ? — A. As 
much again. 

Q. $200,000 or $250,000 would start a well-equipped factory ? — 
A. A well-equipped factory; not as large as the big ones, and there- 
fore not quite as economical, but a good factory. It is very easy 
to start in the cordage business. 

What Savings the Combination was expected to make 

Q. Now, to come back to the question as to the other savings 
that were made by your combination. Besides these two attempts 
you have explained, which failed to corner either the raw-material 
market or the market for machines, what other savings were you 
able to make ? — A. We did not attempt ever to corner the raw- 
material market. 

Q. These special contracts ? — A. They were discriminating 
contracts, under which we had half a cent advantage, but no corner. 
A corner is when the other fellow cannot get any at all. 

Q. What other special advantages did you expect to get, or did 
you get, from your combination ? — A. Well, of course, making 



132 THE NATIONAL CORDAGE COMPANY 

the bulk of the twine and rope that was used, we steadied the market- 
price, and could steady it at a profitable price. 

Q. In steadying it at a profitable price, did you find your com- 
petitors cutting under to take your trade? — A. Yes. 

Concerns outside the Combination have the Advantage 

Q. Or were they willing to follow you ? — A. I think we were 
a great advantage to our competitors; so much so that I would 
rather have been on the outside than in the combination. 

Q. You think those outside have an advantage ? — A. Have an 
advantage in nearly every combination. The only combinations 
in my mind that are bound to succeed are those which are of real 
benefit to the people. In other words, those that introduce econo- 
mies and are able to maintain them so that the people get cheap 
goods and the outsider cannot compete with them. Those are a 
benefit to the country, and those are the combinations that are 
controlled to advantage. Those that put the price where it will 
encourage competition are bound to go to pieces. 

[133] Q. You don't think, then, that the cordage industry is 
one in which there can be any special economies made ? — A. I 
do not think so to any large extent. I think a large mill properly 
run is better than any combination of mills. That is my present 
opinion. 

Q. (By Mr. Litchman.) What effect would it have if the combina- 
tion controlled patents ? — A. That would be a splendid thing for 
the combination; but there are no patents in our business. There 
is nothing to give us a hold on the business at all except the control 
of the raw material, and that does not seem practical either. 

Q. Your opinion would be modified then if the combination had 
the control of patents and trade-marks at an extreme value ? — 
A. Then it would be very valuable. 

Large Single Manufacturers have Advantage over Combinations 
in Certain Cases 

Q. (By Mr. Jenks.) You said that you thought a large single 
manufacturer would have an advantage over a large combination 
of companies ? — A. I think when one group of men are devoting 
their energies to running one mill and distributing their goods, they 
do it cheaper and better than they do when they are looking after 
a group of mills. 



INDUSTRIAL COMMISSION TESTIMONY 133 

Why Assets 0} National Cordage Company did not cover Liabilities 

[134] Q. You said that owing to the credit situation in 1893 your 
organization went into the hands of a receiver. Did your assets 
prove enough to pay creditors ? — A. No, and I will tell you why. 
The panic caused in the hemp and binder twine market by the failure 
was so great that binder twine which was worth and would have 
been sold for $6,000,000 sold for about $2,500,000. The shrinkage 
came entirely from the panic caused by the failure in the hemp and 
binder twine markets. [Producing paper.] Here is a hemp chart 
that I thought would be interesting to you, showing the fluctuations 
in manila hemp for the years from 1870 to 1900. The middle price 
is about 6 cents. It runs quite evenly for a time. When the Na- 
tional Cordage Company failed, it went down and stood very low. 
The price fell to the lowest ever known for manila hemp, 3 cents to 
3§. During the Spanish war the hemp, of course, went up, and 
when the war was successful it went down again. And then the 
Manila ports were closed, and it ran up to about 14 cents a pound 
from 3 J. 

Reason for Failure of National Company and Shrinkage of 
its Assets 

Q. So that you would say that the failure of the National Cordage 
Company was due in the first place to a shrinkage of credits from 
outside reasons ? — A. I consider it was entirely due to that. 

Q. And then the failure of the assets to cover the indebtedness 
was due to the panic caused by the company's failure ? — A. To 
the panic caused by its failure and the general depression that ensued 
from that. Why some of the twine that would have been sold 
at 10 cents a pound did not realize 3 cents. It does not seem possible 
that there could be such a shrinkage. 

Q. Do you recall about what the payment was ? — A. No, I 
do not. The reorganization committee had charge of that. Some 
people were secured and others were not, and there were different 
kinds of settlement. 

Reorganization — The United States Cordage Company 

Q. Will you briefly outline the reorganization of the National 
Cordage Company into the United States Company ? — A. That 
I had nothing to do with. The old directors resigned and the board 



134 TEE NATIONAL CORDAGE COMPANY 

was reorganized with a bankers' board of directors, and I have never 
had a word to say about the United States Cordage Company 
or the Standard Rope and Twine Company. 

Q. About what percentage of the plants of the old company 
remained in the United States Company ? — A. Well, they all 
remained in; but some were sold out afterwards. The Standard 
Rope and Twine Company still holds some, and is still offering 
plants for sale; cannot run them successfully. 

Q. You say the United States Cordage Company sold some of 
their plants off pretty soon. Do you know whether they closed 
down any of them ? — A. I think they did, oh yes; and the same 
way with the Standard Rope and Twine Company. That is only 
running two plants, I think, now. 

Q. Out of about how many ? — A. Well, I do not know how many 
they have sold. This is hearsay that I have been testifying from. 
They must have seven or eight plants, but I think they are only 
running two. 

National Cordage Company took in only Good Plants 

Q. We will go back for a moment to the management of the 
National Cordage Company. Did I understand you to say that 
when that was organized you took in none excepting good plants 
that had been making profits ? — A. That was certainly so. 

Q. As you bought up plants from time to time did you follow 
the same principle of taking in good plants? — A. I cannot re- 
member the exact plants we took in, but we only took in plants 
that were competing with us, and we eliminated that much competi- 
tion with us by taking them in. 

Q. Well, you took in plants only that were competing with you; 
did you take in some that were not making money ? — A. I think 
they were all making money. I do not remember now. If you 
tell me any specific case or plant you are thinking of, perhaps I 
can tell. 

[135] Q. What I ask is this: The statement is frequently made 
that the most dangerous competitiors are those concerns which are 
on the verge of bankruptcy and are not making money. I wanted 
to know if that was your experience ? — A. No, I do not think 
that was the case with us. You see the formation of the National 
Cordage Company and our holding a fair margin of profit enabled 
them all to make money, and I think they were all making money. 



INDUSTRIAL COMMISSION TESTIMONY 135 

Of course, a bankrupt plant that comes in as a new competitor 
is a dangerous competitor, but that did not occur so far as I can 
remember. I think they were all going concerns and making money. 
I think you will find that the Plymouth Cordage Company and the 
Fitler Cordage Company and all those big concerns made handsome 
profits during the time of the National Cordage Company. 

No Change made in Wages — Duration of National Company — 

Salaries 

Q. Did you make any change in the wages of your employees? — 
A. No; not the slightest. 

Q. How long was the National Cordage Company in existence ? — 
A. I think it was from 1887 to 1893. 

Q. Was there in the management of the National Cordage Com- 
pany any material increase in the salaries of the superintendents 
and officers over what they had been receiving before in the separate 
plants ? — A. No ; the reason why there was not was because each 
director had to look after the manufacture in his own plant; it was 
to his interest to keep the same persons. I may add that the officers 
of the National never received any salary. 

Q. Was that generally true ? — A. They were large stockholders, 
but they never received any salary. That was the principal officers. 
Of course, the clerks did. But I never received any salary. I 
ruined myself in trying to support the stock of the National Cordage 
Company, as has been proved by testimony on record in New York. 
I bought over $1,000,000 worth of stock to try to support it when 
the panic ensued — to try to support our preferred stock; and that 
is what ruined me. 

Q. Was that true of all the officers ? — A. I think it was. It 
broke nearly every one of them. They were all standing behind 
the stock, my partner, Mr. Marshall, and Mr. Wall, and they all 
lost heavily. We thought we could pull it through; we did not know 
there was going to be such an immense collapse of values. It is 
easy enough to make money in the cordage business now. I am 
making money in my little concern. 

No Advantage from Combination in Cordage Business 

Q. But you thought you could carry it through at that time 
and the National Cordage Company could sell out its stocks ? So 



136 THE NATIONAL CORDAGE COMPANY 

that the general result of your experience is still that there is no 
material saving from a combination in that field ? — A. No; that 
has often been discussed since then. I do not believe the cordage 
business can be consolidated successfully; I mean there will be no 
advantage in it. 

Washington, D. C, April 13, 1901. 

Testimony or Mr. Gideon F. Holmes 

Treasurer of the Plymouth Cordage Company 

[138] The commission met at 10.48 a.m., Vice-Chairman Phillips 
presiding. 

At 12.07 p.m. Mr. Gideon F. Holmes, of North Plymouth, Mass., 
treasurer of the Plymouth Cordage Company, was introduced as a 
witness, and, being duly sworn, testified as follows: 

Q. (By Mr. Jenks.) Will you please give your name and address ? 
— A. Gideon F. Holmes. 

Q. And your address ? — A. North Plymouth, Mass. 

Q. You are treasurer of the Plymouth Cordage Company ? — 
A. I am treasurer and general manager of the Plymouth Cordage 
Company. 

Q. How long have you been engaged in the cordage business ? — 
A. I have been with the Plymouth Cordage Company for 42 years. 

Pooling Agreements in the Cordage Business 

Q. Has the Plymouth Cordage Company at any time been con- 
nected with other cordage manufacturers through pools 1 or agree- 
ments regarding selling, or has it formed part of a combination 
at any time ? — A. It has in times past. 

Q. Will you tell us concerning some of the agreements that the 
Plymouth Company has had with other concerns ? Please state 
about when these agreements were made, and describe their general 
nature. — A. Well now, I am not prepared to give you the exact 
dates. 

Q. Can you tell us about the time ? — A. It would go back 
several years. We had a pool whereby each concern was allotted 
a certain percentage of the business done by the entire pool, and 
then if we overran our percentage we paid into the pool a certain 
amount per pound, and if we fell short we received from the pool. 

1 See pp. 126, 147. 



INDUSTRIAL COMMISSION TESTIMONY 1 37 

Q. Did that pool include any large proportion of manufacturers 
in the country ? — A. Yes. 

Q. Substantially all of them ? — A. I am not sure that it included 
all, but most of them. 

Q. Was the pooling arrangement that you had in those days a 
profitable one to your company ? — A. We have made more money 
outside of a pool than we have in a pool. 

Q. Did any special advantages accrue to you from any of your 
pooling agreements ? — A. We thought so at the time, but later 
on we concluded that it was not to our advantage. In fact, we paid 
in every time into the pool. 

Competition with the National Company 

[139] Q. You were solicited to join the National Cordage Com- 
pany at the time that was organized ? — A. Well, we were solicited 
to sell out to them. 

Q. When the National Cordage Company was in active operation 
did you find that it interfered materially with your business so as to 
lessen your profits by the sharpness of its competition ? — A. No. 

Q. Were they able at any time through their agreements with the 
sellers of manila hemp to gain any special advantage in that way ? — 
A. No. 

Q. The statement has been made that at one time at least the 
National Cordage Company succeeded in getting purchasing agree- 
ments by which they had half a cent per pound advantage of other 
buyers in the United States. Did your company experience this 
disadvantage ? — A. We never experienced anything of that kind. 

Q. You thought you were able to buy as cheaply as they ? — 
A. Yes. 

Q. As regards the selling price of rope, were you in the habit of 
following the prices that they had set, or were your prices established 
wholly independently ? — A. Well, we followed them pretty closely. 
Perhaps in explanation of that I may say that it has been the policy 
of our company from the very beginning to put out goods of special 
merit. We have always considered quality and fair dealing first, 
and commercial gain next. In fact, in our judgment commercial 
gain naturally follows merit, and we are satisfied if we know that 
our competitors are not underselling us. 

Q. On the whole, did the National Cordage Company hold prices 
somewhat higher than they had been before the cordage company 



138 THE NATIONAL CORDAGE COMPANY 

was formed, so that by following them you really got a benefit from 
the company's existence ? — A. Yes, but whether they would 
have put up the price if the price of hemp had not been advanced is 
quite another question. Their trying to get the control of hemp 
naturally put up its price, and, of course, manufactured goods had 
to follow. 

Q. Did the price of the manufactured goods go up more than 
proportionately to the price of hemp ? — A. I cannot say that it 
did, but all the manufacturers had more or less hemp on hand from 
which they gained the advantage of the higher price. 

Speculative Nature of the Cordage Business 

Q. Does the raw material in the manufacture of rope form so 
important a part of the product that the business is made some- 
what speculative in its nature on account of the raw material market ? 

— A. For the last few years it has been decidedly so. 

Q. Earlier such was not the case ? — A. Not to such an extent. 
Of course, when the National Cordage Company started in and 
tried to buy large quantities of hemp, they naturally pushed up the 
price. 

Q. And you were fortunate enough to have a good stock on hand ? 

— A. Yes, we had to follow them to an extent. We did get caught 
once or twice, but it averaged up all right. 

Q. Are you accustomed to buy your hemp, speaking generally, 
in sufficient quantities to last you a year, or do you buy from time 
to time ? — A. If I think the market is low, I anticipate my wants 
and buy hemp. If I have a feeling that prices are going to decline, 
I hold off the market. 

Washington, D. C, April 13, 1901. 

Testimony or Mr. William W. Fitter 

President and treasurer, Edwin H. Fitler Company 

[146] The commission being in session, at 1.07 p.m., Mr. William 
W. Fitler was introduced as a witness, and, being first duly sworn, 
testified as follows: 

Q. (By Mr. Jenks.) What is your business address, Mr. Fitler ? — 
A. No. 23 North Water street, Philadelphia. 

Q. What is the name of your company, and what position do 
you hold in it ? — A. Edwin H. Fitler Company, of Philadelphia, 
and my position is president and treasurer. 



INDUSTRIAL COMMISSION TESTIMONY 1 39 

Connection with Pools — Efforts to purchase Fitter Company 

[147] Q- Was your company at any time connected with any 
pools l or associations of cordage manufacturers ? — A. Well, that 
was before my time. This company never has been connected 
with any, but the old firm was connected with a pool many years 
ago. 

Q. Before the organization of the National Cordage Company ? — 
A. Yes. 

Q. Have you been connected with any of the three last combina- 
tions — the National Cordage Company, United States Cordage 
Company, or the Standard Rope and Twine Company ? — A. Never, 
in any way. 

Q. Were efforts made to buy you out ? — A. Yes. 

Competition with National Cordage Company — Cutting of Prices 

Q. Did you find, before the time of the organization of the Na- 
tional Cordage Company, that the pressure of competition was 
very severe? — A. When they first started, yes; but afterwards, 
in later years, it was not so hard. 

Q. In what special ways did they seem to have the advantage 
of you ? — A. Of course I am talking now about the Edwin H. 
Fitler & Co., our predecessors. Our present company is the sons; 
it was reorganized at my father's death. 

Q. I asked you in what special ways you felt the opposition in 
the trade. Where did they get the advantage of you ? — A. Well, 
I think that in the early days when they first started out there was a 
great desire to whip a lot of us into line, and therefore the competition 
was severe. It was a question of a good deal of nerve to stand 
out and fight against tremendous capital. 

Q. You felt it mainly in the cutting of prices ? — A. Yes. 

Q. Did you find they had any advantage at all in the buying of 
the raw material ? Were they able to corner the product in whole 
or in part ? — A. No. They tried to. 

Q. What was your experience in that ? — A. When they first 
started out they apparently had control of spot or nearby fiber, 
as we call it. Of course that threw us on our resources, the supplies 
we happened to have on hand at the time, which were not quite 

1 See pp. 126, 138. 



140 THE NATIONAL CORDAGE COMPANY 

sufficient on account of certain sailers being late. We generally 
had our sailers coming forward from the islands. We felt it badly 
for about 3 weeks and after that our supplies came in. 

Q. You had no further trouble ? — A. Oh, there was a pinch 
once in a while; but we were running rather close to the wind. 

[149] Q. (By Mr. Farquhar.) What effect on prices of twine did 
the failure of the National Cordage Company, in 1893, have ? — 
A. It depressed the price as nearly as I can remember. I believe 
they had quite a surplus of twine, and the twine business had a 
sort of lull at that time. 

Q. Did the most of you carry over stocks to the succeeding year, 
or did you keep on manufacturing ? — A. We kept on manufacturing 
but we curtailed. 

Washington, D. C, April 19, 1901. 

Testimony of Mr. Joseph G. Taylor 

Secretary-Treasurer of the Standard Rope and Twine Company 

[151] The commission met at 10.55 A - M -> Chairman Kyle presiding. 

Mr. Joseph G. Taylor, of New York City, secretary-treasurer 
of the Standard Rope and Twine Company, appeared as a witness, 
and, being duly sworn, testified as follows: 

Q. (By Senator Kyle.) Give your full name and address to the 
stenographer, please. — A. Joseph G. Taylor, secretary-treasurer 
of the Standard Rope and Twine Company, 17 State Street, New 
York City. 

Q. (By Mr. Jenks.) How long have you been engaged in the 
cordage business ? — A. About 14 years. 

Q. What other companies have you been connected with besides 
the Standard Rope and Twine Company ? — A. The National 
Company and the United States Company. 

Q. What positions did you hold in those companies ? — A. Well, 
of course, they varied considerably. I rose from the lower ranks 
to the higher ones. I started with the National Cordage Company 
in a junior clerical position, and about four years previous to the 
failure of that company, in 1893, I had charge of the hemp, partic- 
ularly of hemp contracts. 

Reason for the Failure of the National Cordage Company 

[155] Q. Let us consider for a moment your different positions. 
You spoke of being with the National, the United States, and the 



INDUSTRIAL COMMISSION TESTIMONY 141 

Standard Rope and Twine Company. Will you sketch briefly the 
cordage situation as it appeared to you at the time of the reorgan- 
ization of the National Cordage Company into the United States, 
and then from that again into the Standard Rope and Twine Com- 
pany ? What were the reasons that led to the failure of the National 
Company ? — A. Lack of money, that was why they failed. 

[156] Q. Was there a speculative element in the matter ? Was 
there any special reason why prices fell so that they needed to have 
large sums of money ? — A. I do not swear to the truth of this, 
but in my opinion the formation of the National Cordage Company 
advanced prices much more than their intrinsic value, and by not 
having sufficient capital to continue the business as they wanted 
to, and control the business, which they were unable to do, the 
National Cordage Company failed, and consequently prices assumed 
their proper level. 

Q. You think, then, they had been pushing prices really higher 
than the conditions of business would warrant ? — A. Why they 
put up the price of hemp something like 15 or 16 cents a pound. 

Q. When you say they put up the price of hemp, you mean 
to say they had control of the market ? — A. They were the only 
buyers. 

Q. If they were the only buyers, why did they not put prices 
down ? — A. They did not want them down. 

Q. I thought you said manufacturers made more money when 
prices were low ? — A. This was a combination, a combination 
that controlled everything. 

Percentage of Manufacturers Included 

Q. How large a percentage of the manufacturers of the country 
did they get together ? — A. They got practically all with the 
exception of the Plymouth and Fitler companies. 

Savings which the Combination Effected in Production 

Q. Was the National Cordage Company able to make any material 
saving in the cost of manufacture? — A. Yes; I think they did. 
I am pretty sure they did by the organized equalization of manu- 
facturing — by knowing the different methods that were applied 
in each mill and correcting them to the best possible method that 
was applied in any mill. 



142 THE NATIONAL CORDAGE COMPANY 

Q. Were they able to save materially in freights by shipping 
from the nearest plants ? — A. Oh, decidedly. 
. Q. Can you give any instances ? — A. Now, that is entirely 
out of my line. I know they always claimed, and the person that 
had charge of the freight business has always claimed, that they did 
make a large saving. 

National Cordage Company did away with Sales Agents 

[159] Q. Do you sell to the larger jobbers or direct? — A. We 
do sell through jobbers, but largely direct. 

Q. When the National Cordage Company was organized was there 
any material saving made in the cost of distribution from the fact 
that they could do away with traveling men and commission men ? — 
A. When the company was formed they did the business of the 
Deering and McCormick people, and they used to ship train loads 
of binder twine — 28 cars at a time — and they did nothing in a 
small way. It was practically all jobbing. They did not have any 
sales agents whatever. 

The Standard Rope and Twine Company sells through the Union 
Selling Company 

Q. The present organization does not run on that basis ? — A. 
The present organization markets its own goods through what is 
known as the Union Selling Company. 

Q. Will you please explain that organization and your relation 
to it ? — A. It was formed to market our goods. We consign all 
our goods to them, and do not sell through anybody else. They 
have established agencies in different sections all over the country — 
at Omaha, Cincinnati, Chicago, Indianapolis, Boston, Austin — 
twenty-six or twenty-seven agencies. 

Q. Do they act simply as your agents or do they buy your goods ? 
— A. They do not buy; they act as our agents, and they employ 
in the branch establishments from one to four salesmen, as the 
case may be. 

Q. Do they take the product of anybody else? — A. No; ex- 
clusively for us. 

Q. The company is practically your company except that it is 
technically and legally separate ? — A. Yes. 

Q. Made up by substantially the same stockholders ? — A. Not 
the same stockholders. Some men are stockholders in both com- 



INDUSTRIAL COMMISSION TESTIMONY 1 43 

panies. We simply formed the company for the benefit of getting 
to the small trade direct. 

Percentage of Cordage Business Controlled by the National and 
Standard Companies 

I 1 63] Q. I believe you made it clear that the National Cordage 
Company got possession of more than 50 per cent of the business 
of the country by the combination ? — A. We had more than 50 
per cent — more than 60 per cent. 

Q. (By Mr. Jenks.) And your company now has probably one- 
third ? — A. No; I should say about 15 per cent. My idea as 
to the consumption is more conservative than other people's in the 
business. 

A Trust impossible in the Cordage Business 

Q. (By Mr. Kennedy.) Is it true that the conditions in this 
industry are such that it is impossible to bring about such a com- 
bination as will drive the independents out of business or force them 
into the combination ? — A. You have seen the result of that in the 
United States Cordage Company. There will never be another 
combination in the cordage business. There may be an association, 
and I do not think there will be any money in the business unless 
there is some association or combination, or call it whatever you 
will, for the general betterment of the industry at large. There 
will never be another trust, or whatever you may call it, in the 
cordage business. 

Control of Raw Material by the National Cordage Company 

Q. (By Mr. Farquhar.) By combination can you effect any 
economies in the purchase of raw material over the individual 
properties ? — A. No; none whatever. 

Q. (By Mr. Jenks.) At the beginning did the National Cordage 
Company try to get special rates on raw material ? — A. They 
put themselves in such a position that they were the only buyers. 
They wanted to control the hemp market. 

Q. Did they for a time hold a decided advantage over the Ply- 
mouth and the Fitler companies ? — A. Well, the Plymouth and the 
Fitler companies were more or less interested. There was an under- 
standing with the National in connection with the hemp industry. 

Q. So all three were practically together ? — A. Yes. 



144 TEE NATIONAL CORDAGE COMPANY 

Q. You are certain there was an understanding ? — A. Oh, 
I know there was an understanding. 

Q. May I ask what the source of your information is ? Did 
you see the contract? — A. No; but we shipped hemp to the 
Plymouth and Fitler companies when I was with the National 
Cordage Company. 

Efforts of National Company to secure Control of 
Plymouth Company 

Q. (By Mr. Kennedy.) Did the National Cordage Company 
go to extremes, or did it make extraordinary efforts to secure control 
of the Plymouth Cordage Company ? — A. I think we had some 
of their stock; I do not really know how much. My information 
would come only from gossip, but I think some effort was made to 
get control of their stock. 

Q. Did they keep a standing advertisement in the Boston papers 
offering much more than the value of the stock ? — A. I do not 
remember that. 

Understanding between Concerns as to Prices — such Agreements 
cannot be Maintained 

Q. (By Mr. Phillips.) Have you had an understanding with a 
large majority of the plants engaged in the cordage business to sell 
at given prices ? — A. That is what the cordage association is. 

[164] Q. That is what you are endeavoring to do now ? — A. Yes; 
we do have a sort of gentlemen's agreement on prices whereby 
everybody is bound to live up to the prices, but they do as they 
please when it comes to the test. 

Q. Have you found the difficulty in such agreements to be that 
some one would cut under ? — A. I have never known it to fail yet. 

Q, That is the rule when these understandings exist that some 
one will cut under the price ? — A. They may not do it themselves, 
but through their agents they do it. They do cut. I have never 
known it to fail yet. 

Q. Such an understanding has never been kept long in any in- 
dustry ? — A. Never. 

(Testimony closed.) 



June 3, 1895 
UNITED STATES CORDAGE COMPANY 
Reorganization Agreement 

[Manhattan Trust Company, depositary, 2 Nassau street, T. H. Went- 
worth, secretary.] 

This agreement, made in the city and State of New York, this 
third day of June, in the year 1895, between Frank K. Sturgis, 
William Barbour, and John I. Waterbury, and such other person 
or persons as may hereafter constitute said committee, hereinafter 
called the committee, parties of the first part, and such of the first 
mortgage bondholders and holders of guaranteed stock, perferred 
stock, and common stock of the United States Cordage Company 
as shall assent and become parties hereto and comply with the terms 
hereof, parties of the second part. 

Whereas the United States Cordage Company is a corporation 
incorporated under the laws of New Jersey, with an authorized 
capital stock in all of three hundred and forty thousand shares of 
the par value of $100 each, of which shares sixty thousand or there- 
abouts are guaranteed stock, eighty thousand shares or thereabouts 
are preferred stock, and two hundred thousand shares or thereabouts 
are common stock, whose respective rights and priorities are set 
forth in the certificate of incorporation of said company; and, 

Whereas such corporation has an issue of six per cent thirty-year 
gold bonds, to an amount of $7,500,000, secured by a mortgage 
to the United States Trust Company, of New York, as trustee, 
bearing date January 1, 1894, upon the mills and property of the 
company; and, 

Whereas default has occurred, or is likely to occur, in the payment 
of the interest falling due on said mortgage bonds on the first day 
of July, 1895. 

The principal or interest, or both, of underlying liens upon the 
mortgaged property have fallen in arrears to a large amount, and 
have not been discharged, and certain other subsidiary liens are 
about to fall due, and that funds be provided therefor, and it is 
necessary that a readjustment be had of the rights and priorities 

H5 



146 THE NATIONAL CORDAGE COMPANY 

of the said bondholders; that further cash capital be provided for 
the company, and that a reorganization take place of its affairs 
for the benefit and security of the bondholders and stockholders 
alike; and, 

Whereas if the mortgaged property should be sold under said 
mortgage there is danger that no adequate bid or price would be 
obtained therefor, unless the stockholders and bondholders, of whom 
there are a very large number, shall act in unison and protect their 
interests; therefore, the following plan for the protection of the 
interests of the bondholders, stockholders, and of all other parties 
in interest in the company has been agreed upon between the com- 
mittee and a large number of bondholders, holders of guaranteed 
stock, of preferred stock, and of common stock, and certain credi- 
tors, viz: 

Plan of Reorganization 

One or more corporations shall be created, and by foreclosure 
of the existing mortgage made to the United States Trust Company 
or otherwise be invested with the title to the real estate and other 
properties of the company, or of such as the committee herein 
named shall determine to retain. The term company as hereinafter 
used is intended to refer to such corporation or corporations as shall 
finally be utilized to issue the securities or perfect the reorganization 
provided by this plan. 

The Company shall create, and, as required, issue the following 
securities : 

1 st. Its fifty-year first mortgage six per cent gold bonds for the 
sum of $1,000 each, bearing interest at the rate of 6 per cent per 
annum, and secured by mortgage or deed of trust to a trust company 
in the city of New York, approved by the committee, as trustee, 
and which, upon satisfaction of or providing for the existing mortgage 
of the United States Trust Company and the subsidiary liens, shall 
be a first lien upon the company's property, rights, and franchises, 
and which shall contain, among other things, provisions for a sinking 
fund of at least one per cent annually; for the payment of the said 
bonds at any time prior to maturity at the price of 105 and interest; 
for the sale of any of the real estate and property of the company not 
required for use in its business and the application of the proceeds, 
and such other provisions as counsel shall advise. The entire 
issue of such bonds shall be limited to $3,000,000. 



REORGANIZATION AGREEMENT 1 47 

2nd. Its fifty-year consolidated five per cent mortgage gold bonds 
of $1,000 each, or other approved denomination, secured by a mort- 
gage or deed of a trust to a trust company in the city of New York, 
approved by the committee, as trustee, which, on satisfaction of 
or providing for the existing mortgage to the United States Trust 
Company and any subsidiary liens, shall be a lien upon the company's 
property, rights, and franchises, subject to the said first mortgage 
to the amount of $3,000,000, hereinbefore described. Said mortgage 
shall contain similar provisions in reference to the payment of the 
said bonds prior to maturity at par and interest, for the sale of any 
real or personal estate not required for the business of the company, 
and such other provisions as counsel shall advise. The entire 
issue of bonds thereunder shall be limited to $7,500,000, of which 
the necessary amount shall be used in exchange for the present out- 
standing issue of first-mortgage bonds and the interest due thereon, 
as hereinafter provided. 

The said bonds shall entitle the holder to interest at the rate 
of five per cent in any year, payable from profits, if earned prior 
to any dividend upon the stock and not otherwise, which interest 
shall be non-cumulative. Provided, however, That in any year in 
which a dividend of two per cent per annum shall be declared and 
paid upon the stock of the company there shall be paid upon such 
consolidated bonds from the profits of the company for such year, 
if such profits shall justify the same, in addition to interest at 5 per 
cent, as above provided, an amount not to exceed 2§ per cent, 
provided the unpaid interest in arrear on said bonds shall equal 
such amount, and if not, then to the amount of such interest as 
may be so in arrear. Such bonds shall also have voting power 
attached thereto. 

3rd. Common stock to the amount of $12,000,000. 

Such shares shall be of the par value of $100 each, and the form 
thereof and of such bonds and the mortgages to secure the same 
shall be such as the committee and counsel shall approve. 

The holders of bonds and stock of the present company who shall 
become parties to the reorganization, and who shall deposit their 
bonds and stock with the committee, and comply with the conditions 
hereof, shall be entitled to receive bonds and stock as hereinabove 
described, on the following basis: 

(1) The holders of the present outstanding issue of $7,500,000 
of bonds shall be entitled to exchange the same at par for such 



148 THE NATIONAL CORDAGE COMPANY 

consolidated bonds, hereinabove provided for, the interest coupon 
maturing July 1, 1895, to be paid in like bonds. 

(2) Every holder of guaranteed stock of the present cordage 
company shall subscribe at par for said new first mortgage bonds 
(aggregating $3,000,000) to the amount of $20 per share for his 
respective holding, and shall pay $5 per share upon becoming party 
to this agreement, and the remainder in three instalments upon 
the call of the committee upon not less than ten days' notice, and 
shall receive the completion of such payments and upon the per- 
formance of the condition herein, when prepared for issue, bonds 
of the said issue of $3,000,000 at par to the amount of said payment 
in cash, interest on such bonds to be adjusted, and shall also receive 
eighty per cent in common stock of the new company at par upon 
the par value of his said holding of guaranteed stock deposited 
under this agreement. 

(3) Every holder of preferred stock of the present cordage com- 
pany shall subscribe at par for said new first mortgage bonds (aggre- 
gating $3,000,000) to the amount of ten dollars per share for his 
respective holding, and shall pay $2.50 per share upon becoming 
party to this agreement, and the remainder in three instalments 
upon the call of the committee upon not less than ten days' notice, 
and shall receive upon the completion of such payments and upon 
the performance of the conditions herein, when prepared for issue, 
bonds of the said issue of $3,000,000 at par to the amount of said 
payment in cash, interest on such bonds to be adjusted, and shall 
also receive forty per cent in the common stock of the new company 
at par upon the par value of his said holding of preferred stock 
deposited under this agreement. 

(4) Every holder of common stock of the present cordage company 
shall subscribe at par for said new first mortgage bonds (aggregating 
$3,000,000) to the amount of five dollars per share for his respective 
holding, and shall pay $1.25 per share upon becoming party to this 
agreement, and the remainder in three instalments upon the call 
of the committee, upon not less than ten days' notice, and shall 
receive upon the completion of such payments and upon the per- 
formance of the conditions herein, bonds of the said issue of $3,000,000 
at par to the amount of said payment in cash, interest on such 
bonds to be adjusted, and shall also receive twenty per cent in the 
common stock of the new company at par upon the par value of 
his said holding of common stock deposited under this agreement. 



REORGANIZATION AGREEMENT 149 

(5) Such bonds out of the amount of $3,000,000 as may not 
be subscribed for, and any bonds or stock not required for exchange, 
and any securities or cash on hand shall be used and disposed of 
by the committee for any purpose or purposes of reorganization 
or the expenses thereof or for the benefit of the company, as to the 
committee may seem fit. 

(6) From the amounts to be raised, as herein provided, the under- 
lying liens existing upon the mortgaged properties of the company 
or such as the committee shall approve, shall be retired, provided 
that any of said existing bonds or sublying lien bonds or liabilities 
which the committee shall decide to pay if not due, or if payment 
cannot be made, may be left outstanding, provided the committee 
shall retain or deposit cash, or an amount of such new bonds of the 
issue of $3,000,000 equal to the outstanding bonds or liens or equal 
to any liability thereon. 

Now, therefore, this agreement witnesseth, that the subscribers 
hereto have agreed with each other and with the committee as 
follows : 

First. That the parties of the second part hereby constitute 
and appoint Frank K. Sturgis, William Barbour, and John I. Water- 
bury attorneys in fact for them and each of them in carrying out 
this agreement and as the Committee of Reorganization. 

Second. That each party hereto of the second part will co-operate 
to carry the foregoing plan, and this agreement, into effect and will 
deposit his bonds and stock of whichever class as herein provided 
with the Manhattan Trust Company at the city of New York when 
required, and will execute proper transfers of each of the same, so 
that the legal title thereto may become vested in the committee, 
for which certificates shall be issued, on behalf of said trust company, 
in such form as the committee shall approve, which certificates 
the committee will endeavor to have listed upon the New York Stock 
Exchange, provided, that if any of the parties hereto shall fail to 
surrender or transfer their said bonds or stock, or fail to make the 
required payments, or fail to comply with the terms hereof, such 
party or parties shall forfeit all payments and have no further 
right to participate in the benefits hereof. 

Any stockholder or bondholder not becoming a party hereto, 
and not depositing his stock or bonds, shall not be entitled to 
participation herein, nor to share in any form in said reorgani- 
zation. 



150 THE NATIONAL CORDAGE COMPANY 

Third. The committee shall be sole judge as to when and in what 
manner and to what extent the plan shall be carried out. The 
committee may, in its judgment, declare the plan operative; and 
in case, for any reason, the plan shall not be declared operative, 
or the same be declared abandoned, before or after any change 
therein, the securities deposited shall be returned to the several 
parties depositing the same, and all cash repaid, less the pro rata 
share of the expenses incurred, subject to the provisions herein 
contained as to the right to use certain of the cash to carry on the 
business of the company. The committee may extend time for 
acceptance, may abandon the plan at any time, and may take such 
other steps as in their judgment shall be deemed best to carry out 
the same. 

Fourth. The committee, may fill any vacancy, appoint sub- 
committees, counsel, attorneys and agents, and incur such expenses 
as in its judgment are required in carrying out the plan. The com- 
mittee may confer with any receivers appointed, and take such 
steps as shall, in their judgment, be necessary in regard to any claim 
or liability preferred against the receiver or the company. Said 
committee may transfer the said bonds and shares of stock into 
their own names, and may vote in person or by proxy upon the same 
either in their names or in the names of the equitable owners, at 
any meeting, regular or special, of the stockholders of said existing 
corporation, or otherwise, or may receive a proxy from the Manhattan 
Trust Company to vote on the same, and may take any steps gener- 
ally which it may be advised by counsel to be necessary to protect the 
interests of the owners or for carrying out of said plan, and in par- 
ticular may call any meeting which the stockholders or bondholders 
might call, and institute or defend any suits which the stockholders 
or bondholders themselves might institute or defend. The com- 
mittee may in like manner declare due the principal of the said 
bonds secured by mortgage to the United States Trust Company, 
or take any proceedings or make any requests, whether for fore- 
closure of the mortgage or otherwise, to carry out the plan. The 
committee may, in the name of the bondholders, demand any action 
or relief from the United States Trust Company or other trustee 
which the parties themselves could demand. Upon any sale or 
sales of the property of the said existing company the committee 
may, in its discretion, purchase and acquire the same, or any part 
or parts thereof, and use said bonds and stock and securities in its 



REORGANIZATION AGREEMENT 151 

possession or deposited to pay for the same, and shall hold the same 
when so purchased, and generally exercise all and singular the powers 
and discretion which the parties of the second part, or any of them, 
might or could do singly or collectively as stockholders, bondholders, 
or otherwise. The committee may construe this agreement, includ- 
ing said plan, and its construction, made in good faith, shall be con- 
clusive. The committee may designate the first board of directors 
of any company or companies, and cause the reorganization plan 
to be carried out. 

Fifth. That the amount to be bid at any sale of the property 
of the company or any part thereof shall be in the discretion of the 
committee; and in case the committee shall not purchase the said 
property or any portion thereof, it may receive the dividends due 
on the securities held by it from the proceeds of sale and distribute 
the same, less the pro rata share of the expenses. The committee 
may, however, in case of a sale in parcels, permit any parcel or any 
particular property to be sold, and use the proceeds for the benefit 
of the reorganization. The committee may exercise its judgment 
as to which of the properties of the present company to retain, 
and whether any other property or properties should be acquired. 
The committee is further authorized to alter or amend this plan 
and supply any defects or omissions therein, or to otherwise change 
the same, provided, however, that the amounts to be contributed 
by stockholders, or demanded from them, shall not be increased, 
nor shall any increase be made in the amount of bonds to be secured 
by the first mortgage hereinbefore described, nor as to the amount 
thereof to be issued as is hereinbefore provided. 

Sixth. The committee shall offer to each outstanding first mort- 
gage bondholder the right of becoming a party hereto and of exchange 
as herein provided, and shall also offer to each and every guaranteed, 
preferred, and common stockholder becoming a party hereto the 
privilege of subscribing for the bonds so to be issued at the rate 
mentioned in the plan ; and a syndicate or syndicates may be formed 
to carry out or make effective this plan, and to purchase the amount 
not subscribed for, and secure and guarantee the same. The com- 
mittee is authorized to dispose of any bonds of the said amount 
of $3,000,000, or of the said issue of $7,500,000, or of any stock 
not taken, to said syndicate, as provided in this agreement, and, 
further, to pay such amount as shall in their judgment be necessary 
to any syndicate to underwrite or guarantee the same, and may use 



152 THE NATIONAL CORDAGE COMPANY 

the surplus of bonds or stock for the purposes of said reorgani- 
zation. 

Seventh. In case it becomes necessary to provide for fractions 
of shares or of bonds, in the distribution of the new securities, the 
committee will make such adjustment and cause scrip certificates 
to be issued. The committee shall have power, in case the plan 
be declared effective, to acquire, compromise, or adjust any out- 
standing bonds, claims, or evidences of debt, to borrow any money 
required to carry out such adjustment, and to raise any necessary 
funds, and to pledge all or any of the securities in its hands as security 
for the repayment of such amount, or for any other purpose hereunder, 
and to adjust any liens upon any of the property to be acquired, 
or acquire or purchase any other liens or property, and at any time, 
whether before or after the plan be declared effective; to advance 
or loan to the receiver or receivers of the company upon such security 
as said committee may approve such amount or amounts as shall 
be necessary for use in carrying on the business and affairs of the 
corporation, which loans while outstanding shall be deemed expenses 
of the reorganization. 

Eighth. It is agreed, however, that the committee shall assume 
no responsibility except to undertake, in good faith, to carry out 
the plan. They shall not be personally liable, except in case of 
willful malfeasance or gross neglect, nor for the acts of their agents 
or employees. The committee shall act by a majority, and all acts 
of the majority shall be acts of the committee. Any member of 
the committee may resign upon giving notice in writing to the other 
members of the committee, and any member may become pecuniarily 
interested in any of the property or matters which are the subject 
of this agreement, and may become members of any syndicate to 
carry out the plan; and they shall be allowed reasonable compensa- 
tion for their services. 

Ninth. This agreement shall be printed and copies thereof, or a 
separate assent thereto, may be signed by the parties becoming 
parties thereto, but all of said copies of agreement so signed, or of 
said separate assents, shall be taken to constitute one original paper, 
and the deposit of stock or bonds hereunder without signatures 
shall make such depositor a party hereto. 

Tenth. This agreement shall bind the heirs, executors, adminis- 
trators, and assigns of the several parties assenting thereto, and 
such parties, by whatever name called, shall be held to include 



REORGANIZATION AGREEMENT 



153 



guardians and all persons acting in any fiduciary capacity, and in 
like manner all corporations. 

In witness whereof we have hereunto set our hands the day and 
year first above written. 



Name 



Address 



Security 



Amount 



Numbers 
















A HISTORY OF 

THE NATIONAL CORDAGE 

COMPANY 



WITH A SUPPLEMENT CONTAINING 
COPIES OF IMPORTANT DOCUMENTS 



BY 



ARTHUR S. DEWING, Ph.D. 




CAMBRIDGE 

HARVARD UNIVERSITY PRESS 

1913 



